STEVE CHIOTAKIS: President Obama is in France today, hob-nobbing with leaders from other wealthy nations for the G8 conference. On the agenda? Who’ll lead European rescue efforts at the International Monetary Fund? And bank regulation to prevent another financial crash. There are reports today some banks are trying to spin off their risky investment divisions.
Marketplace’s Stephen Beard is with us live from London. Hi Stephen.
STEPHEN BEARD: Hello Steve.
CHIOTAKIS: Now why would some banks be thinking about isolating their riskier businesses in the first place?
BEARD: Well, let’s take two banks in particular — UBS and Credit Suisse, the Swiss banks. They are facing the toughest regulator crack down in the world. Switzerland was very badly hit by the banking crisis because it has two of the world’s biggest banks, but a relatively small economy. So to protect Swiss taxpayers in future, the Swiss government’s introduced some very, very stringent new capital rules.
And Margaret Doyle of BreakingViews says the Swiss banks are asking themselves how do we make a profit in this new environment?
MARGARET DOYLE: Because the rest of the wrold isn’t following suite, we’ll end up being on competitive. So they are looking at their options and seeing what can they do to mitigate the affect of these tough new capital rules.
CHIOTAKIS: Is it possible Stephen, like The Wall Street Journal reports this morning that the UBS will set up a spin off of its investment bank outside of Switzerland?
BEARD: Margaret Doyle thinks not because for one thing, those countries where that spin off might be set up perhaps wouldn’t be too happy about exposing their tax payers to the additional risk. Margaret Doyle thinks it’s more likely that in fact most of these so called universal banks in Switzerland and elsewhere in the U.S. too will ring fence their investment banking arms. So they can be wound down swiftly in the event of trouble so tax payers don’t end up picking up the tab.
CHIOTAKIS: Marketplace’s Stephen Beard in London Stephen thank you.
BEARD: OK Steve.
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