Sarkozy seeks EU-wide accounting rule change
Ben Hall in Paris and Nikki Tait in Brussels – 1 October 2008 – 04Asia Ed1 –
President Nicolas Sarkozy of France is to urge his European Union counterparts to back changes to accounting rules and give banks and ins-urers some breathing space amid the market turmoil.
Mr Sarkozy seeks agreement to fresh regulations including changes to the mark-to-market accounting rules that have been blamed for aggravating the crisis.
Mr Sarkozy is seeking to give political momentum to EU efforts to tighten financial market rules after France became the latest European government yesterday to use public money – €3bn ($4.21bn, £2.37bn) of it – to bail out , the Belgo-French banking group. The president called a “crisis meeting” of French banks and insurers yesterday to discuss the financial turmoil.
The Elysée said it would unveil measures this week intended to ensure banks did not choke off credit to the rest of the economy.
Mr Sarkozy had hoped to hammer out a common European position on regulation at a summit hastily convened in Paris for Friday with his German, British and Italian counterparts, as well as the presidents of the European Commission and European Central Bank. However, the meeting might have to be delayed because of conflicting schedules.
The French government has been at pains to emphasise the relative stability of French banks, which benefit from large retail businesses to help balance their investment banking operations.
Henri de Castries, the chief executive of Axa, the French insurance group, who was at yesterday’s Elysée meeting, said “the French financial system [is] a stable system with a very comfortable solvency”.
However, Mr Sarkozy is keen to respond to mounting public concern and take action, even though the EU has rejected a call for a US-style blanket rescue plan. The French leader, who holds the EU’s rotating presidency, wants the German, Italian and British premiers to back moves to inject flexibility into EU fair value standards. Banks and insurers have complained that so-called mark-to-market rules – a snap shot of value – forced them constantly to write down the value of their assets, putting them under further financial pressure. France wants amendments “giving time to banks to smooth the effects” of the mark-to-market standard, said an official in Paris, with a longer-term review of the whole system.
Mr Sarkozy will also urge the EU to back market-led measures to curb excessive bankers’ pay and tighter regulation of ratings agencies.
The European Commission placed responsibility for stabilising markets and resolving the current financial turmoil firmly with the US yesterday, as officials expressed strongly worded disappointment over Congress’s rejection of the $700bn rescue plan on Monday. “The turmoil that we are facing originated in the US. It has become a global problem. The US has a special responsibility in this situation,” the commission’s senior spokesman said.
He said that Brussels still expected a bail-out package to be approved “soon” and urged lawmakers there to take the lead: “The US must take its responsibility in this situation, must show statesmanship for sake of its own country and for the sake of the world.”
The European Central Bank, he added, was doing “a superb job” in supplying liquidity to the European markets. As for the proposed summit meeting, he said that was an initiative of the French presidency and reflected the desire for an international meeting to discuss the situation “at the highest level”.