Bankers take back seat at economic forum

For a sign of how the mood has changed at the World Economic Forum in Davos this week, consider the speakers at an invitation-only client lunch hosted by Paul Calello, who runs Credit Suisse Group's investment bank.

Last year's panel on "Financial Market Dynamics" featured senior executives from financial companies JPMorgan Chase, Blackstone Group, hedge fund Eton Park Capital Management and NYSE Euronext.

This year clients will learn about "Leadership, Responsibility and the Recovery of the Financial System" from UK and Swiss regulators and Laura D'Andrea Tyson, an economics professor who has served in the US government.

"Regulatory reform and how that plays out at the national and global level will have major impact on the shape of financial services," Calello said.

"That is obviously of interest to a broad audience, not just those working in the financial services industry."

Financiers will cede the spotlight to government officials, regulators and central bankers at this year's annual showcase of global power brokers as government's role in markets has gained prominence.

More than a year after the high-water mark of the worst financial crisis since the Great Depression, bankers are in retreat on issues ranging from the size of their companies to the size of their paychecks.

US President Barack Obama, who isn't scheduled to attend the conference, has denounced "fat-cat bankers" and called for limitations on the size and trading activities of financial institutions. The UK Government, which is supporting four of the country's lenders, has imposed a 50 per cent tax on bankers' bonuses for 2009 as a way of recovering some of its costs.

"There will be a lot of bowing and scraping before the central bankers, treasury secretaries and regulators," said Niall Ferguson, a professor of history at Harvard University in Cambridge, Massachusetts, who will be participating in three sessions at the conference. "They kept the show on the road, and we have to acknowledge the state matters much more these days."

White House economic adviser Lawrence Summers, UK chancellor of the exchequer Alistair Darling and French President Nicolas Sarkozy will be among the political elite at the Swiss ski resort this year.

Adair Turner, the chairman of the UK's Financial Services Authority, and Barney Frank, chairman of the US House Financial Services Committee, are participating in public panel discussions.

Davos will be missing some prominent bankers who appeared in previous years. JPMorgan Chase chairman and chief executive Jamie Dimon dropped out, and Goldman Sachs chairman and CEO Lloyd Blankfein will be skipping the event for the second year in a row.

While those attending may represent banks that are too big to fail, they are not too big to keep a low profile. Citigroup chief executive Vikram Pandit, Morgan Stanley chairman John Mack and the chief executives of Credit Suisse and UBS won't be speaking at any sessions listed in the official programme. Bank of America chief executive Brian Moynihan and Goldman Sachs president Gary Cohn are each participating on one panel.

None of them will be speaking at a session on "Redesigning Financial Regulation" moderated by Barry Eichengreen, a professor of economics and political science at the University of California at Berkeley. That panel will include European Central Bank president Jean-Claude Trichet, the governor of the central bank of Mexico, the South African finance minister and the chief executive of UK insurer Prudential.

"In years past, the good and the great believed that markets and financial institutions could be relied on to self- regulate, so the people on the stage were the self-regulators," Eichengreen said. "Now we've learned that the official sector needs to apply vigorous regulation. The people who are going to be speaking reflect that new reality."

Banks are facing escalating calls from politicians, economists, union leaders and media commentators on both sides of the Atlantic for policy changes that could threaten their business.

Obama proposed a levy on banks with liabilities that exceed US$50 billion ($70 billion) to recoup US$117 billion in taxpayer money that helped stabilise the financial system in 2008 and 2009. Mervyn King, Governor of the Bank of England, has advocated breaking up banks deemed too big to fail. The G-20 countries have called for new capital and liquidity requirements for the biggest banks.

"The pendulum has completely swung to the politicians and bureaucrats," said Michael Holland, chairman and founder of New York-based Holland & Co. "It's not for the business people to have any say whatsoever - the new boss is in town."

That doesn't mean bankers will be rolling over in Davos or that they won't try to influence regulators and policy makers to go easy on them. They may repeat warnings delivered at a conference in Istanbul in October that financial regulations could jeopardise economic growth.

Financial companies continue to play a key role in the World Economic Forum, with more than 25 banks, insurers, exchanges and investment companies serving as sponsors of the annual meeting. They include Bank of America, Citigroup, JPMorgan, Goldman Sachs and Morgan Stanley, as well as the two biggest Swiss banks and HSBC Holdings, Barclays and Standard Chartered from the UK.

Two of the seven co-chairs of this year's meeting run banks: Deutsche Bank chief executive Josef Ackermann and Peter Sands, chief executive of London-based Standard Chartered. Ackermann, who chairs the Institute of International Finance trade group, has positioned himself as a spokesman for the industry. He said at a conference in London last week that proposals to split up or limit the size of banks are "misguided".

Ackermann and Sands will be the most visible bankers in Davos, with each participating in three sessions. On Saturday, Ackermann will take the stage as the sole private-sector executive alongside Summers, the finance minister of France, the deputy governor of the People's Bank of China and Dominique Strauss-Kahn, managing director of the Washington, DC-based International Monetary Fund.

Offstage - in private sessions and dinners - bankers may wield more clout. Ackermann is one of a group of bank CEOs scheduled to take part in an "informal" Saturday gathering on global financial regulatory reform with central bankers and ministers, said Ackermann's spokesman Stefan Baron.

"Closer international co-operation among policy makers and business leaders is the top issue we need to address at this year's annual meeting in Davos," Ackermann said.

"We have to find the right regulatory responses to the financial crisis and start paying off the fiscal liabilities incurred as a result."

Indeed, last year's questions about bank solvency have given way this year to concerns about government debt burdens and central bank plans to withdraw support of financial markets, said the University of California's Eichengreen.

"We have transformed the banking crisis into kind of a sovereign solvency crisis by buying up a lot of private securities and auto companies and so forth," he said.

"We've dealt with the consequences of vaporising US$3 trillion of private demand in the US by providing a lot of public demand."

For the most part, participants at Davos will use the event to network with people from around the world in as short a time as possible, rather than to pontificate on global issues.

In a sign of how little of the action at Davos takes place at public events, only two of the seven Goldman Sachs executives attending the forum are participating in discussions on the official schedule.

"This is a client-driven event for us," said Samuel Robinson, a company spokesman. Goldman Sachs will host "a couple of small, private dinners" that will include "a range of clients". He declined to comment further.

The bank's delegation includes four executives from New York, two from London and J. Michael Evans, chairman of the firm's Asian business, who is based in Hong Kong.

Cohn, Goldman Sachs's president and the most senior executive attending from the firm, is scheduled to participate in a panel on "Rethinking Risk in the Boardroom" that will be closed to the media.

The other Goldman Sachs executive making an appearance is Dina Powell, head of corporate engagement, who will be one of 12 panellists in a discussion on Wednesday.

Her subject: how business can address rural poverty.

DAVOS 2010
* The World Economic Forum holds its annual meeting in Davos, Switzerland, from tonight until Monday.
* About 2500 people will participate, including Government representatives of the world's top 25 economies and fast-growing small countries. More than half will come from the business sector.
* The World Economic Forum was founded in 1971 as an independent international organisation committed to social and economic development.
* Its motto is "entrepreneurship in the global public interest".

- BLOOMBERG