In the past year, the Basel group of central bankers has proposed capital and supervisory guidelines for international financial operations that have been poorly received by the securities industry and developing countries.
Suggested equity ratios for ensuring competitive fairness between securities dealers and banks' trading arms have again been spurned by International Organization of Securities Commissions after repeated attempts to adopt a common approach.
Consolidated oversight rules embraced last year in the wake of the Bank of Credit and Commerce International scandal have barred the expansion of Latin America-based ad Asia-based groups, notably in the United States, where the principles are embodied in the Foreign Bank Supervision Enhancement Act.
Harmonization Hindered
At a time when the world banking system faces an "uncertain focus," in the words of the Bank for International Settlements, the lack of global and interindustry cooperation is glaring, and endangers progress toward harmonization through the current General Agreement on Tariffs and Trade talks and other initiatives.
Government and professional bodies can inject needed momentum by creating a separate forum dedicated specifically to advancing financial service convergence across the range of business and geographic lines.
Worldwide, the universal banking model is increasingly the norm. In Europe, the "single passport" equips institutions to lend the deal on equities and insurance throughout the region.
In Japan, the barriers between commercial and investment banking have been eroded under recent statutory reform.
In the United States, banks' Article 20 subsidiaries, authorized under the Glass-Steagall Act, have moved aggressively into debt and equity underwriting.
Expansion Quelled
In developing countries, too, financial liberalization and modernization continue apace, with officials striving to attain international oversight standards for capital adequacy and other areas. Perhaps the nation offering the best example of this supervisory commitment is Mexico, which has pledged under the North American Free Trade Agreement to match the style of rigor in the United States and Canada.
Yet, an application by industry giant Banamex to open a branch in Miami was denied earlier this year under the foreign bank supervision act, because of the alleged absence of consolidated local and overseas monitoring by Mexican authorities.
Following this rejection, other Latin American institutions, fearful their regulators would not pass muster either, withdrew their expansion plans.
Cooperation Needed
At the same time, the Basel committee and the securities commissions organization remain at loggerheads over minimum capital requirements, and their lingering dispute has undermined potential collaboration on other fronts.
Tired of the acrimony which has characterized relations between the two panels, European Community banking and securities officials have pushed ahead with their own directive to go into effect next year. Before his resignation, former Securities and Exchange Commission Chairman Richard Breeden criticized the formula as insufficient to protect investors.
Toward a Turnaround
To resolve these difficulties, which have bred conflict among financial officials in both the developed and developing world, they should meet to charter a new body for truly global financial service cooperation both functionally and regionally.
Their intent should be not to add another layer of multilateral bureaucracy, but instead to fold groups which have to date championed sectoral and hemispheric interests into a unified organization.
This fresh start for multilateral efforts a chance to reverse today's spiral of mutual recrimination.
The dangers posed need not be self-inflicted by regulatory division when a high degree of solidarity can be harnessed to ensure smoothly functioning cross-border and cross-selling activity.
Mr. Kleiman is a senior partner in Kleiman International Consultants Inc. in Washington.
