Hundreds of foreign bankers filled the fancy Four Seasons hotel this week to hear U.S. policymakers.
Government officials covered everything from free trade to financial modernization at the Institute of International Bankers' annual confab.
Federal Deposit Insurance Corp. Chairman Ricki Helfer used her time before the bankers to throw up a red flag.
Rapid growth and speculation had led to the industry's losses on farm, energy, and commercial real estate loans, as well as on sovereign debt, she said. "Neither we nor the industry we supervise can afford to be as wrong as we were in the 1980s again," Ms. Helfer said.
Syndicated lending has more than doubled, to $888 billion, in the last three years, Ms. Helfer said, noting that foreign bankers bought more than half of all syndicated loans in 1996.
"While it appears that syndicated lending has yet to result in major problems ... bankers still cannot afford to be complacent," she said. "We must take into account the potential effect of an economic downturn."
Ms. Helfer also said the Basel Committee on Banking Supervision, which includes regulators from 12 countries, is developing a set of universal minimum standards for sound supervision.
"Common standards will allow us to provide balanced bank supervision across national boundaries," she said. "These minimum standards will significantly contribute to creating a safer global banking marketplace."
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A panel of regulators said Tuesday that a set of best practices will be circulated next week to international supervisors.
The Basel Committee could consider them this month, with action by the Federal Reserve Board possible in April, according to William A. Ryback, the Fed's associate director of international supervision.
"The emphasis is on improving cooperation among supervisors," said John M. Abbott, deputy comptroller of international banking and finance in the Office of the Comptroller of the Currency. "At this stage, we are trying to sort through what exactly each supervisor thinks it really needs from the other to do its job properly."
However, regulators don't want to get too detailed. "We're finding out certainly one size does not fit all," Mr. Ryback said.
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The Bank of England's top regulator advocated a single supervisor to oversee all aspects of an international banking company's business.
David W. Green, head of the central bank's European division, said regulators worldwide had hints that there could be trouble at Barings Bank in the months before a rogue trader brought it down. But no single regulator had a big-picture view of the merchant bank's health, he said.
"Had these pieces of information been collected together, they might have pointed rather rapidly to the fact that something was seriously wrong," he said.
The easiest way to collect this information is to have "a single supervisor who has a formal responsibility to play a coordinating role," he said.
Separately, Richard R. Lindsey, director of market regulation for the Securities and Exchange Commission, noted that U.S. regulators can't agree on how they will oversee firms here once financial laws are reformed.
His solution: Let the SEC be lead supervisor for combined bank and securities concerns in which securities is the larger portion of the business. The SEC would defer to banking regulators on supervision of banking operations, he said.
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Federal Reserve Board Governor Susan M. Phillips warned against extending the federal safety net outside the banking industry.
Ms. Phillips asked what would happen if the auto industry suddenly had all the advantages of banks. What if the government guaranteed commercial paper issued by car companies just as it guarantees deposits? What if automakers had access to the discount window to repay their bonds if they were experiencing liquidity problems?
"The effects of extending such a subsidy are not difficult to imagine," she said. "Automakers would find it very easy to place their commercial paper and would be able to pay below-market yields."
This funding advantage would be unfair because the car makers would find it cheaper to enter new businesses, she said.
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Neil D. Levin told the foreign bankers that he plans to leave as New York banking superintendent April 1. As reported, New York Gov. George Pataki has tapped Mr. Levin to be state insurance commissioner.
Before switching jobs, Mr. Levin said, he hopes to wrap up work on a rule requiring foreign banks to get outside audits.
Under the proposal, healthy foreign banks would have to be audited by an independent firm every three years. Foreign bankers have attacked the plan, and Mr. Levin implied his department plans to back off.
Saying the industry made "compelling arguments" in recently filed comment letters, Mr. Levin added: "We absolutely recognize what the burden is."
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Deputy U.S. Trade Representative Jeffrey M. Lang urged bankers to lobby their peers in developing countries to support a free-trade agreement for financial services.
"This is the most important issue on the World Trade Organization agenda for this current year," he said. "The cooperation of the business sectors in Europe, America, and elsewhere is important to success in the negotiations."
Negotiators plan to wrap up a financial services deal by yearend. The biggest roadblock: countries that refuse to open their markets to foreign banks and securities firms. "Success requires countries to put access on the table," Mr. Lang said.
Home countries would be allowed to retain their regulatory schemes, provided they treated domestic and foreign firms alike, he said.
