LONDON, Feb 28 (Reuters) - Calling time on globalisation in the financial sector is wrong and rolling back on cross-border regulation would undermine economic growth and split markets, a leading central banker said on Tuesday.
Jaime Caruana, general manager of the Bank for International Settlements (BIS), said that assertions by some economists last year that “peak finance” had passed and a process of financial deglobalisation was under way were not borne out by data.
This mattered because accepting that hypothesis could tempt some countries to turn their backs on international financial rules, he said.
“If one thinks that peak finance is passed, then one may believe that there is less harm in choosing purely national regulatory solutions and in reducing international cooperation at the risk of fragmenting financial markets,” Caruana told an audience in Geneva.
He mentioned no one by name, though U.S. President Donald Trump has said that scrapping some bank capital rules would help banks lend more to lift growth.
Trump has in turn been warned by European policymakers not to rip up global banking regulations agreed at the height of the 2007-09 financial crisis.
Global financial integration can play a key role in the spread of best practice and innovation, and contribute to economic growth, Caruana said.
“Continued interdependence in international finance requires global cooperation in managing its risks and in setting global standards.”
Caruana, whose term at the BIS ends towards the end of the year, said that although the retreat in international banking had been regional not global and that bond market credit continued to grow worldwide, the political pressure to roll back global financial integration was “very real”.
He said policies that tend in that direction may have already shaped European banks’ deleveraging in recent years, while the last few weeks have also seen foreign acquisition of firms attract controversy in a variety of countries.
There was a barely-disguised reference to ChemChina’s $43 billion bid for Swiss pesticides and seeds group Syngenta - set to be the largest foreign acquisition by a Chinese company.
“Financial globalisation clearly carries risks that need to be managed. Given its nature, its full potential can be realised only if there is far-reaching cooperation in its management,” Caruana said.
Reporting by Huw Jones and Marc Jones, editing by John Stonestreet