Bank of Nova Scotia's chief executive officer added his voice to the chorus of bankers speaking out against the push for tighter financial regulations, saying the world's major countries risk going too far and stifling economic growth.
Speaking to reporters in Turkey's financial capital Monday, Rick Waugh said the proposals endorsed by the leaders of the Group of 20 countries last month amount to the "most significant re-regulation" of the financial industry that he's witnessed in close to four decades as a banker.
While the near collapse of global financial markets shows some changes are needed, Mr. Waugh, echoing other senior executives in the financial industry, said a hasty attempt to design new rules could impede the recovery policy makers are so desperately trying to nurture after the deepest global recession since the Second World War.
"Love us or hate us, we have to be an effective instrument to look after our customers and to lend," Mr. Waugh said. "With all that capital, the quality, there are some warning signs that it could go too far and have implications on growth."
Mr. Waugh was referring to the G20's plan to force banks in the world's major economies to keep more capital in reserve, and to ensure that capital is of better quality so that if markets seize up there will still be willing buyers when financial institutions sell assets to cover their day-to-day obligations.
While the G20 has agreed to regulatory principles, they still haven't settled on the actual rules. That will be done over the next couple of years.
As a result, bankers are seizing the moment in an attempt to shape the eventual rules as much as possible.
U.S. Treasury Secretary Timothy Geithner told reporters on the weekend that the reaction of banks is "just lobbying" and said the bigger risk is that an improving economy and stable financial markets cause voters and bankers to forget everything that caused the financial crisis.
Mr. Waugh said policy makers risk making mistakes in their rush to rebuild the financial system, citing changes to U.S. accounting rules in the aftermath of the collapse of Enron Corp. that ended up exacerbating the financial crisis.
"Over-regulation can be as detrimental to growth, to jobs, to the economy as not having enough," said Mr. Waugh, who was in Turkey for a conference held by the International Institute of Finance. "We've got to find the balance and look at it as a very long-term plan."