Timothy Adams leans back in an armchair in his central Washington office and offers a circumspect view of his role as head of the Institute of International Finance, the top lobbying arm of global finance. “I’m new on the job,” says Adams, who took up the post of president and CEO in February. “I’ve got a lot to learn.”
Adams is being characteristically modest. The Kentucky native may have no track record on Wall Street or with any of the big banks, insurers and asset managers that pay his salary, but he’s a veteran Washington insider and former George W. Bush administration official who has been involved in financial policy issues for more than a decade. Therein lies his attraction for the institute.
Founded in 1982 by a handful of major banks in response to that era’s budding Latin debt crisis, the IIF grew mightily in stature under former managing director Charles Dallara, who headed the group’s Washington-based staff for two decades, and Josef Ackermann, the ex–Deutsche Bank CEO who served as chairman from 2002 to 2012. When the financial crisis erupted in 2007–’08, the IIF led the global banking and financial services industry in regulatory reform talks with Group of 20 governments. When Greece needed a second bailout last year, Dallara and Ackermann negotiated the 50 percent-plus haircut imposed on private bondholders by the European Union and the International Monetary Fund.
That activism has carried a price, though. The bond losses left a bitter taste in investors’ mouths, while EU and IMF officials complained privately about what they considered to be the institute’s confrontational approach. Dallara also won few friends in officialdom for appearing to try to obstruct regulatory reform (a stance, it must be said, he shared with most IIF members). In a 2010 report to the G-20, the institute warned that a proposed tightening of bank capital standards under the Basel Accord would slow economic growth and suppress nearly 10 million jobs in Europe, Japan and the U.S. The lobbying failed. Regulators are now implementing Basel III, which has been ratcheted up with the addition of a leverage requirement as well as surcharges for systemically important banks.
“Basel III is a bare minimum,” says one senior IMF official. “The banking industry is now facing much stronger stuff.”
If smoothing relations with policymakers and regulators is critical to maintaining the IIF’s relevance in the postcrisis world, Adams has the temperament and experience for the job. As undersecretary of the Treasury for international affairs from 2005 to 2007, he was a rare voice of global cooperation in an administration known for going it alone: He supported the IMF’s effort to launch multilateral surveillance of such issues as China’s trade surplus and the U.S. budget deficit to assess their impact on other trading partners.
Adams is making the IIF’s peace with Basel III and initiatives like the Dodd-Frank Wall Street Reform and Consumer Protection Act, even as he tries to influence implementation by being a “sober voice of reason” to regulators. “I think the world is safer” as a result of reform, he says. But Adams worries about the recent tendency to favor simplicity; for example, Basel III’s blunt leverage ratio, which sets a floor for capital regardless of a bank’s internal risk weightings on its loans. “Simpler doesn’t mean safer,” he contends. “The risk-based capital system is the way to go. We just need to make it better.”
The new chief is determined to focus the IIF on a handful of issues, including the outlook for global capital flows and the state of lending conditions in emerging markets, now home to 40 percent of its 470 members. Charles Collyns, a former assistant secretary of the Treasury and deputy chief economist at the IMF whom Adams recently recruited as chief economist, plans to increase the frequency of the institute’s forecasts of capital flows, to a quarterly basis, and reduce its emphasis on country reports, an area where private banks and the IMF provide better and timelier information. “The challenge is to think about what we can do to add value,” says Collyns.
Adams wants the institute to shape debate on other big topics, such as how to extend financial services to the world’s 2.5 billion unbanked people and how digital technology could transform banking like it revolutionized the music business. Those matters will be debated at the IIF’s annual membership meeting in Washington this week, an amped-up affair with an all-star lineup including BlackRock CEO Laurence Fink, JPMorgan Chase & Co. chief executive Jamie Dimon and Raghuram Rajan, the new governor of the Reserve Bank of India.
“We could have an industry that looks radically different,” says Adams, who’s keen for the institute to reflect those changes. • •
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