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US banks lobbied Swiss regulators to ease Basel rules

JPMorgan Chase denies seeking cancellation of the EU exemption.

JPMorgan Chase and other US banks have given more importance to their own interests than their clients in a fight over tough Basel bank capital rules for derivatives sold privately off exchanges, allege leading European firms.

The European Association of Corporate Treasurers, which represents 6,500 companies, has convinced the European Union to ease the Basel III rules by exempting over-the-counter (OTC) derivatives sold to corporates from an onerous capital charge.

The EU move means banks based there will be able to charge much less for their OTC derivatives than banks elsewhere, reported the Financial Times. The news sparked complaints of an unlevel playing field from US competitors and their trade group Securities Industry and Financial Markets Association (Sifma).

In March, Richard Raeburn, Chairman of the European Association of Corporate Treasurers (EACT), wrote to JPMorgan complaining about efforts by US banks to lobby their regulators and the Basel Committee on Banking Supervision on the issue.

In the letter seen by the Financial Times, Raeburn said the complaints about the EU exemption raised questions about “JPMorgan’s concern for its corporate customers globally”.

“This would not be the first time that the impression is given by investment banks that in determining their policy positions the interests of those customers do not have the priority we feel is merited,” Raeburn wrote.

Raeburn, in an interview, said that the treasurers were also upset by a public letter Sifma sent to US Treasury Secretary Jacob Lew urging him to tell EU officials “this difference in regulatory treatment runs counter to the Financial Stability Board’s and G20’s stated objectives of promoting internationally co-ordinated and consistent implementation of its regulatory action plan”.

JPMorgan, however, highlighted that it is not seeking the cancellation of the EU exemption. Rather, it wanted a global reduction in the charges, known as CVA.

Daniel Pinto, co-head of JPM’s corporate & investment bank, wrote: “We have drawn attention to the inconsistency in the hope that regulators will seek to modify the methodology and calibration of the CVA charge. We always have our client’s best interests at heart. We need a regulatory regime that allows us to compete fairly and to serve them the best way possible.”

Ken Bentsen, acting CEO of Sifma, said: “Basel needs to fix CVA. We don’t think it is appropriate to have different interpretations in different jurisdictions.”

Raeburn said: “We felt that it was essential to bring this issue out into the open. The banks’ customers can draw their own conclusions.”

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Geoffrey Howe dies, aged 88

Howe was Margaret Thatcher's longest serving Cabinet minister – and the man credited with precipitating her downfall.

The former Conservative chancellor Lord Howe, a key figure in the Thatcher government, has died of a suspected heart attack, his family has said. He was 88.

Geoffrey Howe was the longest-serving member of Margaret Thatcher's Cabinet, playing a key role in both her government and her downfall. Born in Port Talbot in 1926, he began his career as a lawyer, and was first elected to parliament in 1964, but lost his seat just 18 months later.

Returning as MP for Reigate in the Conservative election victory of 1970, he served in the government of Edward Heath, first as Solicitor General for England & Wales, then as a Minister of State for Trade. When Margaret Thatcher became opposition leader in 1975, she named Howe as her shadow chancellor.

He retained this brief when the party returned to government in 1979. In the controversial budget of 1981, he outlined a radical monetarist programme, abandoning then-mainstream economic thinking by attempting to rapidly tackle the deficit at a time of recession and unemployment. Following the 1983 election, he was appointed as foreign secretary, in which post he negotiated the return of Hong Kong to China.

In 1989, Thatcher demoted Howe to the position of leader of the house and deputy prime minister. And on 1 November 1990, following disagreements over Britain's relationship with Europe, he resigned from the Cabinet altogether. 

Twelve days later, in a powerful speech explaining his resignation, he attacked the prime minister's attitude to Brussels, and called on his former colleagues to "consider their own response to the tragic conflict of loyalties with which I have myself wrestled for perhaps too long".

Labour Chancellor Denis Healey once described an attack from Howe as "like being savaged by a dead sheep" - but his resignation speech is widely credited for triggering the process that led to Thatcher's downfall. Nine days later, her premiership was over.

Howe retired from the Commons in 1992, and was made a life peer as Baron Howe of Aberavon. He later said that his resignation speech "was not intended as a challenge, it was intended as a way of summarising the importance of Europe". 

Nonetheless, he added: "I am sure that, without [Thatcher's] resignation, we would not have won the 1992 election... If there had been a Labour government from 1992 onwards, New Labour would never have been born."

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.