28
Sep
Obama hails 'tough regulations'
The world's leading nations have agreed "tough new regulations"
to prevent another global financial crisis, US President Barack
Obama has said.
These relate to the amount of money banks have to hold in
reserve and to excessive pay for bankers.
Speaking at the end of a two-day G20 summit, Mr Obama also
outlined plans to give emerging economies a greater say in the
global economy.
The G20 will effectively replace the G8 group of developed
economies.
Global leaders also announced a deal to shift the balance of
voting in the International Monetary Fund (IMF) towards growing
nations such as China at the summit the US city if Pittsburgh.
'Reckless few'
"We have taken bold and concerted action to forge a new
framework for strong, sustainable and balanced growth," said US
President Barack Obama.
"We have agreed tough new financial regulations to ensure that
the reckless few can no longer be allowed to put the global
financial system at risk."
He said that leading nations would now be allowed to assess each
others' economic policies.
Mr Obama added that the leaders had agreed rules to ensure that
executive pay would be linked to long term financial
performance.
Many have criticised excessive bonuses as encouraging the kind
of short term risk-taking that contributed to the financial
crisis.
Despite Mr Obama's declaration, the G20 fell short of agreeing
specific rules on the capital reserves that banks need to hold.
"We commit to developing by end-2010 internationally agreed
rules to improve both the quantity and quality of bank capital and
to discourage excessive [borrowing]," a statement from the G20
leaders said following the summit.
It added that the rules will be phased in once financial
conditions improve and recovery is "assured".
The leaders also fell short of agreeing a cap on bonuses,
agreeing instead that bonus payments should not be guaranteed for
many years, should be deferred in part, and should not exceed a
percentage of the bank's revenue.
'Fudging it'
"We designated the G20 to be the premier forum for our
international economic co-operation," the statement said.
It added that the global leaders would shift "at least 5%" of
the quota of votes within the IMF from "over-represented countries
to under-represented countries".
It described under-represented countries as "dynamic emerging
markets and developing countries".
Emerging economies will also get a greater say at the World
Bank.
The leaders also pledged to continue pumping money into their
economies until "a durable recovery is secured".
But there will be no formal announcement that the G20 will
replace the G8 until 2011, said the BBC's economics editor
Stephanie Flanders.
"The leaders would have liked formally to announce the handover
today in Pittsburgh, but the Canadians - who are chairing the G8
next year - kicked up such a fuss that they had to fudge it," she
said.
There will now be a G20 meeting on the sidelines of Canada's G8
Summit next June, where most of the economic business of the day
will be discussed.
But, formally at least, the economic side of the G8 will live on
another year.
'Distrust'
The IMF has 186 member-states. It lends money to countries that
are facing problems, but in return economic changes have to be made
by those countries.
Currently, China wields 3.7% of IMF votes compared with France's
4.9%, although the Chinese economy is now 50% larger than that of
France.
The IMF has been criticised in the past as being a group of
developed countries trying to lay down the law to struggling
countries, which is why the decision to give growing nations more
votes is important.
"If you talk to the Chinese or talk to anyone from emerging
markets they say the IMF doesn't have legitimacy and... we don't
trust the IMF to come and rescue us in a crisis," Simon Johnson,
former chief economist at the IMF, told the BBC.
"They don't trust it because it's US and West Europe-dominated.
That's not fair... and the IMF doesn't function properly as a
result."
Nobel prize-winning economist Amartya Sen welcomed the change in
voting rights, but said that, "on their own, they won't be able to
achieve much... It's not just a question of voting rights, but also
a question of broadening the dialogue".
source: www.bbc.co.uk/news Monday
28th September 2009