Obama's risk warning sends shockwaves through markets
Stock markets on both sides of the Atlantic fell yesterday after US President Barack Obama pledged to tighten regulations on the world's biggest banks to prevent a repeat of the 2008 financial crisis.
Fifteen months after the collapse of the investment bank Lehman Brothers, which triggered the worst banking crisis since America's Great Depression and deepened the global recession, Mr Obama promised to curb risk-taking.
The FTSE 100 index fell 1.6pc while the Dow Jones had plummeted 2pc by close of trading last night.
Mr Obama's plans will essentially limit a bank's abilities to make money on their own book rather than that of their clients -- what is known as proprietary trading -- and will also stop them from owning risky hedge funds and private equity funds that work against their own clients.
He also wants to increase regulation to stop financial institutions from becoming "too big to fail", so that if a bank were to collapse it would not threaten the rest of the industry.
"We have to enact common-sense reforms that will protect American taxpayers and the American economy from future crises," Mr Obama said.
"For, while the financial system is far stronger today than it was one year ago, it's still operating under the same rules that led to its near-collapse."
The move is likely to affect big British banks with operations in the US, including Barclays and the Royal Bank of Scotland. Meanwhile, George Osborne, the UK Conservatives' shadow chancellor, said he would copy Mr Obama's recent plan to tax US and foreign-owned banks to recoup as much as $90bn (e64bn) from America's bail-out of the financial system.
"This is a welcome move by Mr Obama that accords very much with our thinking," he said.
(© Daily Telegraph,