I break my habit of “posting” the weekend because today an article of mine has appeared in Cinco Días that is related to the concerns of some of us and our readers. For example, with half a dozen of Luis’ posts about our financial system. One of the things I say in the article is precisely:
“Perhaps the most difficult issue facing the G-20, and I’m not sure how they will manage to resolve this or any other summit, is related to coordination.” There are many giant financial institutions that operate in many nations but The case of the Icelandic banks is paradigmatic, how could a small country guarantee the huge deposits of foreigners in the hands of its banks? The answer is that it could not. to go to the rescue of these depositors. Spain or Ireland also has banks much greater than their share due to their size or level of development.
In this regard, the relevant G-20 working group also says sensible things. It is necessary to create transnational regulatory mechanisms. Countries must act together in crises. National regulations must be harmonized. All this is fine, but it sounds like empty words. In times of crisis, countries will act largely in their own interest. The British saved the Icelandic banks because they played the money of their subjects. But we will not always be so lucky or things will be that easy.
The most difficult part of the work of the G-20 will be convincing itself to create international institutions for banking regulation that are as powerful and with as many instruments as the ECB. That they can, if necessary, close a large national bank, recapitalize it or merge it with another. But if here, in Spain, we cannot do something like that with savings banks from different autonomous communities so as not to upset the local barons, imagine the ECB merging a large German bank with a Spanish bank. Good luck, G-20, we’re going to need it!
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