Brittan defies US on securities rules

SIR LEON Brittan, vice-president of the European Commission, yesterday fired a warning shot at Washington on international capital adequacy standards for securities trading, countering an increasingly hard-line approach by the United States, writes Lisa Vaughan.

'In today's global markets, no single national regulator - however large their domestic market - can expect to impose their system on everyone else,' Sir Leon told the annual meeting of the International Organisation of Securities Commissioners.

He was responding to remarks by Richard Breeden, chairman of the US Securities and Exchange Commission, opposing a proposal on capital standards being debated within the IOSCO this week.

Mr Breedon called the proposal 'imprudent in the extreme' and 'highly unsafe'. It is backed by the UK Securities and Investments Board and has been formalised in Europe's Capital Adequacy Directive, which sets capital minimums for European banks and securities firms for market risk on debt, equities, foreign exchange and underwriting.

With views polarised, an emergency IOSCO committee yesterday ended without agreement on this and two other issues.

The UK believes capital requirements should be flexible to reflect the risks involved in market positions and that a diversified, hedged portfolio reduces risk. But the SEC requires US securities firms to hold capital equal to a minimum 15 per cent.

Sir Leon said: 'The basic 'building block' method used in the CAD may be novel but it is certainly not, as some have claimed, unsafe.' The Commission will review the CAD if it is persuaded that banking supervisers in Basel and the IOSCO have better solutions. But it will be reluctant to impose increased, unjustified capital burdens on firms, he said.

Commentary, page 29