US’S Geithner-don’t try to benefit at U.S. expense

WASHINGTON (Reuters) – U.S. Treasury Secretary Timothy Geithner warned other countries Monday against trying to benefit from stiffer U.S. financial market rules by keeping their own regulation light.

“The United Kingdom’s experiment in a strategy of ‘light touch’ regulation to attract business to London from New York and Frankfurt ended tragically,” he said in excerpts of a speech to be delivered at an Atlanta monetary conference.

“That should be a cautionary note for other countries deciding whether to try to take advantage of the rise in standards in the United States,” Geithner added.

He said the United States wants to avoid “another race to the bottom around the world” as efforts are made to impose regulations to lessen the risk of a repeat of the 2007-2009 financial crisis.

Global agreement on rules would reduce opportunities for ”regulatory arbitrage” in which companies seek out the jurisdictions with the slackest regulation in order to push the envelope on allowable activities.

“As we act to contain risk in the U.S., we want to minimize the chances that it simply moves to other markets around the world,” Geithner said.

He also said there was a need to develop international minimum standards for margins that are required on uncleared derivatives trades. Without such standards the effort to get central clearing of these trades established will suffer.

“Risk in derivatives will become concentrated in those jurisdictions with the least oversight,” Geithner said, adding: ”This is a recipe for another crisis.” (Reporting by Glenn Somerville; Editing by James Dalgleish)