Give Us Global Standards or Give Us Chaos – Open Letter to US Congressman McHenry

US Congressman Patrick McHenry recently sent a letter to Federal Reserve Chair Janet Yellen criticising the Fed’s participation in setting global banking rules of conduct and asserting that standards are agreed in opaque settings. But standardisation lowers business costs in finance as in manufacturing – for American banks and investors as well as their international counterparts. A common set of rules for the global financial industry is just a matter of common sense, argues Thomas Murray.

On Jan. 31, 2017, US Congressman Patrick McHenry sent a letter to Federal Reserve Bank Chair Janet Yellen insisting the Fed stop cooperating with other central banks on global rules of conduct, at least until the new administration has given her a clear political line to follow.

As vice chairman of the financial services committee in the House of Representatives, Congressman McHenry criticised the central bank for its “continued participation” in meetings outside the United States “despite the clear message delivered by President Donald Trump in prioritising America’s interest in international negotiations.” He termed this unacceptable, and wrote that these agreements have resulted in higher capital requirements for banks in the U.S., which he in turn blamed for slower economic growth.

The parties directly concerned in policy-making have since responded, including Chairman Yellen. The stakes for financial services are such that this firm feels obliged to share its views from its position as an active user of these standards.


A near namesake of the congressman, Patrick Henry, a great American patriot, declared just ahead of the American Revolution: “I know not what others may choose but, as for me, give me liberty or give me death.”

This is not 1775. Today, we simply ask for public respect for the value of hard-negotiated global financial standards. Admittedly, this “give us global standards” request does not have the same ring to it, but it matters for the world’s financial system.

The firm of Thomas Murray assesses capital markets risks in more than 100 countries on behalf of banks and institutional investors. Our clients strive to follow and comply with ever-changing law and regulation, and to benefit from the efficiencies of global norms. Standardisation lowers business costs in finance as in manufacturing, for American banks and investors and their counterparts.

This company reaffirms its very longstanding support for the Financial Stability Board’s Compendium of Standards, which have been crafted with public oversight. They are a common heritage we share as actors in a global financial market. They give us a compass to navigate in an intangible environment lacking physical landmarks. The standards are imperfect; they are not high art: they are the product of human debate over how to organise financial services across countries with differing laws, economic structures, and standards of living.

We respectfully counter the congressman’s assertion that these standards are agreed in opaque settings: Managers at this firm have participated in public hearings and submitted written comments to the committees writing these texts. Our comments have been considered. We have not won every argument. But this firm’s suggestions and edits were noted, and in a democratic process, we realised that we would not win every point. We benefited from hearing the well-considered viewpoints of others on the hard questions posed by the evolving financial system.

These standards are not binding. If the US had adopted the G20/OECD Principles of Corporate Governance, it might have avoided a few board failures. Had it adopted IFRS for accounting, it might have had better business information. These are counter-factual arguments. All governments have had choices on adoption of Financial Stability Board texts. The Compendium is aspirational; its power lies in the knowledge synthesised in them.

Congressman McHenry’s letter makes for an odd read on bank capital requirements. American banks were among those clamouring for a more level playing field in the 1980s when the Cooke Committee ratios were written, the calculations known later as Basel I. The reason for that initiative was the sense that Japanese banks were undercapitalised, operating “on the cheap.” The economic impact of that bubble’s subsequent deflation has been massive. When finance drives off the road, it brings chaos and slams into Main Street, killing the jobs Congressman McHenry is rightly concerned about, and does more damage than that. The chaos of 2007-2009 broke the growth trajectory of the world economy, no less.

As to Basel III, managers at this firm testified before a sub-committee of central bankers on one of the risk capital ratios. The hearing at the Bank of England had dozens of persons in attendance, taking notes and sharing documents. The questioning was vigorous, the argumentation hard-going but certainly public.

Concerning IOSCO’s capital markets principles and agreements, the voices of managers from this firm have been heard. Many letters have been sent over the years with opinions and advice on the formulation of best practices. They were read. The processes have seemed fair: The coming together of serious public- and private-sector actors applying their minds to difficult questions has generated good and beneficial information and knowledge for finance.

Commonly agreed standards have value. A non-financial analogy about driving off the road might make the point for Congressman McHenry and his constituents in North Carolina. The United States has a federal system of government, and driving codes – the rules of the road – are set state-by-state. Driver’s licenses are also issued by state, but they are recognised country-wide (and abroad). Whatever the details and differences in these codes across states, whether in North Carolina or the other 49 states and territories, the US has long accepted broadly common rules of the road as a prudent good. The need for such prudence may be even more true of finance, which, unlike cars and trucks, slams across borders in a click.


Congressman McHenry would be carefully heard if he asked how the FSB Compendium might be improved, with Americans at the table, pencils sharpened and laptops opened. Taking a baseball bat to policy bodies in which US government representatives have participated, and which strive for the common global good, is not patriotism or productive leadership. Let’s go for better.

The United States will find its best interests prioritised within a safer global financial system, and not otherwise. Our clients tell us so. Common sense tells us so. In 1776, Thomas Paine published “Common Sense,” a pamphlet setting out the logic of his political goals. We believe that a common set of rules for the global financial road is also just a matter of common sense.


The author, Thomas Krantz, is Senior Advisor, Capital markets, in the firm of Thomas Murray; and served as Secretary General of the World Federation of Exchanges (2000-2012). The views expressed are his own, and not necessarily those of the firm.

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Tags: Congressman McHenryFederal Reserveglobal rules of conductFinancial Servicesglobal standardsTABB ForumCompendium of StandardsG20OECDPrinciples of Global StandardsBasel IIIIOSCO