After avoiding Davos last year—only months after Lehman Brothers Holdings Inc. collapsed and the financial crisis was at its height—bankers are cautiously returning. They will number 235, World Economic Forum (WEF) organizers said, a 23% increase from 2009.
But they will still be on the defensive. The prospects for tighter regulation, which seemed to be fading a few months ago, look more likely than ever.
Amid popular outrage about soaring profits and bonuses, political leaders and economic policymakers seem intent on making progress towards some kind of rulebook that would prevent another bank-led crisis of the financial system.
“We cannot afford to have a financial system which is as fragile in the future as it has proved to be in the past,” European Central Bank president Jean-Claude Trichet said this month.
Setting the stage: A worker makes final preparations for the World Economic Forum, beginning Wednesday in Davos, Switzerland. The forum will focus on ways to strengthen the financial system. AP
The world’s top bankers will arrive in Davos just as the political mood in Washington and other capitals is turning against the financial industry again. Last week, President Barack Obama called for laws to keep financial institutions from becoming too big, as well as restrictions on risky practices that include betting bank capital on securities markets.
In Europe, leaders are responding to voter frustration at having to pay for bank bailouts even as unemployment continues to rise.
Bank of England governor Mervyn King has raised the prospect of breaking up the big financial institutions in that country. Britain and France plan to tax banker bonuses, while European Union officials are working on a regional bank regulation agency.
Some bankers say they support new rules, at least in principle. The chief executive of Deutsche Bank AG, Josef Ackermann, a co-chairman of the WEF, said in a video posted on YouTube that he favoured regulations on the amount of capital banks were required to hold, as well as better mechanisms for winding down sick institutions.
But there is widespread suspicion that bankers are hoping, now that the risk of a collapse of the financial system has retreated, to return to business as usual.
The forum, which runs from Wednesday till Sunday, will have several panels on an overhaul of the financial system, which should help keep the issue on the public agenda. There will also be a series of private meetings of government representatives and bank chiefs, who will meet separately in Davos and then together.
©2010/The New York Times