BANKING: A Jolly Good Agreement

Investors can now skip around the globe to buy and sell foreign stocks, bonds and bank notes. But since many nations impose different regulations on their financial systems, the playing field for the international investor is not always a level one. Last week Britain and the U.S. took a major step toward smoothing the surface. The two countries proposed a uniform set of rules to govern banks’ capital reserves. Federal Reserve Board Chairman Paul Volcker called the pact a “breakthrough.”

The accord would require that most American and British banks set aside higher-than-normal amounts of capital to cover losses on their riskier loans. British banks have been subject to risk-based capital requirements for several years, but U.S. banks must currently set aside reserves amounting to only 6% of total assets, however speculative their investments.