DAVOS // Bankers gathered at the World Economic Forum's annual meeting here pushed back against Barack Obama's plans to tax and curb financial institutions. Bob Diamond, the president of Barclays, challenged the US president's effort to limit the size of big banks and restrain risk-taking, telling the opening forum session: "I've seen no evidence that suggests that shrinking banks and making all banks smaller or more narrow is the answer.
"If you step back and say large is bad, and we move to narrow banking, the impact of that on banks and on global trade, the global economy, would be very negative." Some participants argued that job creation was one of the greatest challenges facing the world this year, and that restricting banks' operations was not the way to expand the world economy. Yesterday the UN said that 27 million people around the world lost their jobs last year.
"Avoiding a jobless recovery is the political priority of today," said Juan Somavia, the director general of the International Labour Organisation. "We need the same policy decisiveness that saved banks now applied to save and create jobs and livelihoods of people." Mr Diamond added: "Without risk, we do not have a banking industry - Having banks that are well managed and willing to take risk, and especially willing to take cross-border risk, is essential if we want to have jobs and economic growth."
Jean-Claude Trichet, the president of the European Central Bank, played down transatlantic differences, telling The Wall Street Journal the proposed US reforms were "relevant and interesting" and had the same aims as European measures. "They go in the same direction of our own position, namely ensuring that the banking sector focuses on financing the real economy, which is its key role," he said. But he called for co-ordination to avoid creating loopholes in the integrated international financial system.
Some of the most high-profile bankers, including Lloyd Blankfein of Goldman Sachs and Jamie Dimon of JPMorgan Chase, pulled out of this year's Davos meeting. @Email:warnold@thenational.ae