BRUSSELS – When European Union financial services Commissioner Michel Barnier wrote a letter to Treasury Secretary Timothy Geithner on the complex topic of hedge-fund regulation, he used a little trick he learned from Olympic skiing champion Jean-Claude Killy: Keep it short.

Barnier, 59, who wrote just 16 sentences in his message to Geithner, oversaw the 1992 Olympic Winter Games in Albertville, and worked with Killy.

“I told Michel that letters should be no longer than one page,” said Killy, who won three gold medals for skiing in the 1968 Olympics and worked in 1992 in the same office with Barnier.

Barnier, the former foreign and agriculture minister, is now in charge of drafting Europe’s biggest overhaul of financial rules since the 27-nation bloc’s creation.

The global financial crisis sparked a public and government call for more regulation of financial firms after costing the EU $5 trillion in bank bailouts and loan guarantees. In a U.S. visit that begins today, Barnier is meeting with Geithner, Federal Reserve Chairman Ben Bernanke, bank executives and politicians to try to harmonize the differing approaches of the EU and the United States on preventing another disaster.

The U.S. and Europe have slowly diverged on regulation policy for banks, hedge funds and capital requirements since the leaders of the Group of 20 nations last year called for a unified stance in response to the global financial crisis.

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European banks say capital rules will hit them harder than their U.S. counterparts because they have proportionately bigger loan books. EU rules may lead to a 6 percent drop in Europe’s gross domestic product over the next five years as banks lend less, according to a study from the French Banking Federation.

“We can’t take the risk of another crisis happening without having learned lessons from the previous one,” Barnier said before the trip. “The … citizens will not forgive us. It would be absolutely disastrous from a political point of view.”

Unlike the U.S., the European Union hasn’t proposed measures to regulate bank size. President Obama proposed a law in January recommended by former Federal Reserve Chairman Paul Volcker that would bar banks from investing in hedge funds and cap some deposits to reduce risks.

“The U.S. has proposed the Volcker Rule and is now in the lead,” said Karel Lannoo, chief executive officer at the Centre for European Policy Studies in Brussels. “Barnier will have to carry with him the message that the EU is fully committed to reform.”

 


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