Page last updated at 00:09 GMT, Wednesday, 27 January 2010

Davos 2010: Bank reform plans to cause controversy

By Tim Weber
Business editor, BBC News website, in Davos

Flags outside the World Economic Forum
Business and political leaders from all over the world are in Davos

Disputes over how best to reform the global financial system are set to dominate this year's World Economic Forum in Davos.

French President Nicolas Sarkozy is likely to add to the pressure on banks in a keynote speech on Wednesday.

Numerous sessions on banking reform are expected to see clashes between bankers and regulators.

The forum, meanwhile, is publishing a report on how to redesign the "global financial architecture".

Regulators set Davos agenda

Until two years ago, bankers and bosses dominated the agenda for the 2,500 top business leaders and politicians meeting in the Swiss Alps.

Last year, after the crisis struck, there was no tussle for dominance. Everybody tried to understand what had happened and searched for ideas to recover from the crisis. And most bankers stayed away, firefighting the crisis at home.

This year the bankers are back, but the talk is of reform and restructuring, with politicians, regulators and central bankers setting the framework for discussions.

Some well-known economists appear ready to chip in. "There are few financial innovations that are not just designed to generate profits for banks," mutters one of them at the forum's welcome reception.

Delaying tactics

But listening to bankers here in Davos and elsewhere, it is obvious that they won't just roll over. They are admitting the need for reform, but warn of over-regulation that could undermine any economic recovery. Delaying tactics could be the bankers' best ploy.

World Economic Forum logo in snow

The forum's own proposal on financial reforms may be a case in point. The report's high-powered steering committee includes top bankers and investors from institutions like Allianz, Barclays Capital, Blackstone, Carlyle Group, JP Morgan Chase and KKR.

But the report's grand title - Restoring Trust and Rethinking Business Models Critical to Financial System Resilience - hides vague recommendations like the need to "address equity stakes separately from other types of crisis intervention", "restrict government influence on owned institutions to board-level issues", and a plea to be "realistic about securing and incentivizing the best available talent" (i.e. the need to pay bonuses).

"Everyone understands that appropriate changes are warranted, that excessive risk-taking should be discouraged and that regulatory reform is called for," Jacob Frenkel, the chairman of JP Morgan Chase International, tells me, but adds: "I do worry however that any reforms may give way to bad regulation rather than good regulation."

Recovery, what recovery?

The state of the global economy will be the background to the Davos discussions.

Already I've heard words like "slow recovery", "jobless recovery", "bumpy recovery" being bandied about.

The jobless will be asking: "Which recovery?"

Business leaders and politicians from Asia, meanwhile, will be asking: "Which recession?" Most economies in the region experienced slower growth rates at best and a brief downturn at worst.

The spirit of Davos

But beyond the disputes about regulation and macroeconomics, the much-vaunted Spirit of Davos is alive and well.

Already the networking and schmoozing has begun. For Jeffrey Hamilton, director of global public policy at pharmaceutical giant Merck, the week in Davos is the best opportunity to meet customers and health officials from around the world.

Dr Joel Selanikio (L) and Jock Mendoza-Wilson
Business contacts are already being made

For Richard Reddy, it is a chance to spread the word about technology start-up BioFuelBox. The company develops a process to transform industrial waste grease into biodiesel. That sharply reduces landfill waste, he says, and returns seven times the energy that's put into the process.

Mr Reddy is a Davos first-timer, soaking up the atmosphere.

"I've signed up for many sessions that have nothing to do with our industry - just to get new ideas," he says.

And he just loves Davos: "Look, it's the first hour of the first event, and already it's overwhelming!"

Dr Joel Selanikio has a very straight-forward ambition for his Davos visit: "Fundraising."

The medical doctor is the founder of DataDyne, a company based in the US and Kenya that develops software for the health industry in developing countries.

His mobile phone software - written by engineers in Nairobi - could dramatically cut the cost of vaccination programmes, he says. It could also ensure that patients far away from medical supervision actually take their medication when they are supposed to.

But a couple of grants have run out and he is now drawing on his savings to nurture the company.

Listening in on our conversation is Jock Mendoza-Wilson, in charge of investor relations at Ukrainian steel and banking conglomerate System Capital Management.

"That's just the kind of software that our company's foundation needs to help TB patients in the Ukraine," says Mr Mendoza-Wilson.

Business cards are swapped, and Dr Selanikio may be be one step closer to building a successful company.



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