Unified Regulation Of Global Banking

Banks and investment banks whose health is crucial to the global financial system should operate under a unified regulatory framework with “appropriate requirements for capital and liquidity”, according to Timothy Geithner, president of the Federal Reserve Bank of New York. Writing in the Financial Times, Mr Geithner, a key US policymaker throughout the credit crisis and one of the main architects of the rescue of Bear Stearns, says that the US Federal Reserve should play a “central role” in the new regulatory framework, working closely with supervisors in the US and round the world. Meanwhile, Malcolm Knight, the general manager of the Bank of International Settlements, the Basel-based central banking group, told the FT that the financial system now faces a growing risk of exchange-rate volatility as investors and central banks grapple with the impact of rising commodity prices and other inflationary pressures. “It is not clear if the rest of the world is going to continue to fund the US current account deficit at current levels of exchange rates,” he said. “The pattern of the exchange rates is subject to considerable uncertainty now.” The comments are likely to be closely watched by investors and policymakers, since they come at a time of renewed market focus on the outlook for the dollar relative to the euro and other currencies. Last week, Ben Bernanke, Fed chairman, broke with the US central bank’s traditional silence on currency matters to make clear that it does not want any further dollar weakness. While the dollar rallied on Mr Bernanke’s remarks, it retreated later in the week after European Central bank comments suggested an interest rate rise and as the price of crude oil soared, heightening inflation fears.