Late last week and during the weekend of April 12^th 2008, the G-7 Finance ministers met in Washington. Rarely are commercial interests part of these meetings. However, on Friday evening the finance ministers and central bankers invited representatives of some investment and global banks to join them for dinner. Deutsche Bank, Mizuho Corporate Bank, Citigroup, Lehman Brothers, JP Morgan and Bank of America were rumored to be among the ten or so global institutions invited. According to The London Telegraph, the focus of the dinner was to warn them that more regulations are inevitable in wake of the financial credit crisis.

On April 13^th, The Financial Times is reporting that the banker's suggested solution of a self-regulatory approach centered around a new code of conduct and banks' disclosure of how far they met these codes was not well received. According to the article,

Mario Draghi, the Italian central bank governor, and chairman of the Financial Stability Forum, whose report was endorsed by the Group of Seven on Friday, said the FSF's proposals had, and needed, real teeth. "We call them, with a gentle word, recommendations. Some are actually policy decisions."

Jean-Claude Trichet, the governor of the European Central Bank, was more blunt. He welcomed the private sector's decision to encourage better risk management and transparency but insisted self-regulation was not sufficient. "We all have to take our responsibilities very seriously and displease the private sector, where necessary."

Tim Geithner, the president of the New York Federal Reserve, said: "We have to find a better balance between discipline and regulation in our financial system."

Accounts of a private dinner on Friday between G7 ministers and central bank governors and a group of international bank executives suggest it was a testy affair, with the bankers asking for more help in dealing with their liquidity problems but little new regulation, except on hedge funds.

The bankers, including Joseph Ackermann of Deutsche Bank, Win Bischoff of Citigroup, Bob Diamond of Barclays, John Mack of Morgan Stanley, Richard Fuld of Lehman Brothers and Larry Find of Blackrock, did not have a common position, G7 officials said afterwards.

The article concludes with the thought that biggest fight of all will be about the authorities desire to have banks to hold more capital to guard against risks that contributed to the credit crisis, on complicated structured credit products such as collateralized debt obligations, for example.

For sure, though, more regulations are coming. Toomre Capital Markets LLC thinks that it is highly likely that the large investment banks will be required to reduce their leverage ratios. The reduction in leverage also likely means that their profitability will go down as will the average Wall Street compensation – for those that still have jobs amidst all of the layoffs.