U.S., U.K. Unlikely to Enforce Volcker Rule, Lee Says
The U.S. and U.K. are unlikely to separate banks into deposit-taking and investing activities as the financial industry is too important to their economies, Singapore’s Minister Mentor Lee Kuan Yew said.
Lee, chairman of Government of Singapore Investment Corp., a shareholder of UBS AG (UBSN) and Citigroup Inc. (C), said he agrees with former Federal Reserve Chairman Paul Volcker’s proposal to separate the activities.
“It would be a safer banking system,” he said in response to a question in a dialogue session with about 500 delegates at the Inter-Pacific Bar Association conference at the Marina Bay Sands convention center in Singapore today.
“Would it happen? I don’t think so,” he said, noting that if the United States and United Kingdom did change their rules, financial institutions could migrate to other countries. Lee also said that on the issue of climate protection rules, governments were unwilling to take the necessary action.
“Everyone knows what needs to be done,” he said about tackling climate change. “But every government knows that if they do it, they will be voted out in the next election.”
Lee said he would be surprised if there were any fixed commitments at the next global climate talks in Cancun, Mexico. Some 190 countries failed in December to agree on a binding greenhouse gas treaty at United Nations talks in Copenhagen where wealthy nations pledged $30 billion of climate aid to the developing world.
U.S. Financial Overhaul
Citigroup, Bank of America Corp. and their biggest rivals could be forced to shrink or divest businesses under proposals emerging as the U.S. Senate weighs a sweeping overhaul of financial-industry regulations.
Senators are preparing amendments that would limit the share of deposits and assets banks could control or force them to separate investment-banking functions from commercial lending. The aim is to keep financial companies from getting so big their collapse could threaten the economy.
The legislation is partly based on Volcker’s proposals.
GIC and Temasek Holdings Pte, Singapore’s other state fund, bought stakes in U.S. and European banks as the collapse in the U.S. subprime mortgage market in 2007 froze credit markets and led to losses and writedowns at financial institutions worldwide.
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