March 30, 2010
G20 sounds a warning note on new bank rules
Key Group of 20 leaders and the International Monetary Fund urged governments yesterday to redouble efforts in tightening up financial rules as some countries lag in curbing bank pay.
World leaders congratulated themselves in Pittsburgh last September after agreeing to a sweeping set of reforms that apply lessons from the worst financial crisis since the 1930s.
Turning pledges into coordinated action is facing resistance over timing and substance from some banks and countries.
“One of the lessons of the crisis is that facing global challenges we need to have global answers,” IMF Managing Director Dominique Strauss-Kahn told the Romanian parliament during a flying visit to Bucharest.
“This lesson is about to be lost.”
The IMF chief said individual countries were working on new regulations and creating new supervisory bodies. “The only problem is, they don’t fit together,” he added.
The G20’s steering countries said in a letter to all group members that governments must recommit and deliver on reforms they agreed to in Pittsburgh.
“We all have a mutual responsibility to deliver on all our commitments to address the weaknesses that led to the financial crisis,” the letter said.
“This will require that we maintain our vigilance to address the required reforms and guard against complacency as our economies recover,” it added.
Bank of England director of financial stability Andrew Haldane said it is possible that no amount of capital or liquidity will be enough to totally shield taxpayers as profit incentives may place risk one step beyond regulation.
“That means banking reform may need to look beyond regulation to the underlying structure of finance if we are not to risk another sparrow toppling the dominos,” Haldane said.
But G20 leaders said there can be no let-up on efforts to agree a new set of bank capital and liquidity rules - dubbed Basel III - for implementation by the end of 2012.
They singled out the need to still include a leverage ratio or cap in Basel III as some countries like France have expressed concerns about its impact.
The letter also said all countries must have adopted the existing Basel II bank capital framework by 2011, a reminder to the US which has yet to implement it in full.
They also reiterated the need to regulate over-the-counter derivatives by the end of 2012 and implement the G20’s principles aimed at curbing big bonuses for excessive risk- taking at banks.
http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=352153&version=1&template_id=48&parent_id=28
