G20 leaders talk tough on banks

G20 leaders talk tough on banks

Darling said he hoped banks would now not be rewarded for reckless behaviour [AFP]   G20 finance ministers have agreed to take action over  bonuses for banks, which would see them rewarded for long-term success and not short-term gains. In a communique after a G20 meeting in London, ministers called for "global standards on pay structure ... to ensure compensation practices are aligned with long-term value creation and financial stability". The statement fell short of calling for caps on bonuses, saying: "We also ask the Financial Stability Board to explore possible approaches for limiting total variable remuneration in relation to risk and long-term performance." The position was seemingly a compromise between countries including France and Germany that had pushed hard for pay limits and Britain, the United States and Canada, which were opposed to caps. Performance-based bonuses Tim Friend, Al Jazeera's correspondent in London, said: "What G20 leaders are getting to is a situation where they would link bonuses to performances. "Banks would have to show that the capital available to pay for those bonuses was proportionately in place." Alastair Darling, the UK finance minister, said: "We are determined to take action to stop banks or other financial institutions getting themselves into a situation where their pay and reward practices actually encourage people to take risks. "[This] brings their institutions into a situation where they could be brought down with catastrophic results. "I hope we are going to enter an era where we do not have again a situation where people are being rewarded for reckless behaviour," he said. Tim Geithner, the US treasury secretary, said: "Actions [by the G20] have pulled the global economy back from the edge of the abyss. "The financial system is showing signs of repair. Growth is now under way. However, we still face significant challenges ahead." Stimulus spending Policymakers agreed they would keep spending the $5 trillion already earmarked as economic stimulus and delay any unwinding of emergency fiscal and monetary measures until economies are sturdy enough to stand on their own. "We will continue to implement decisively our necessary financial support measures and expansionary monetary and fiscal policies, consistent with price stability and long-term fiscal sustainability until recovery is secured," the statement said. G20 finance ministers met at the Queen Elizabeth II centre in London [AFP]  "We agreed need for a transparent and credible process for withdrawing our extraordinary fiscal, monetary and financial sector support as recovery becomes firmly secured," it said. "Working with the IMF [International Monetary Fund] and the FSB [Financial Stability Board] we will develop co-operative and coordinated exit strategies, recognising that the scale, timing and sequencing of actions will vary across countries and across the types of policy measures." Some G20 sources expressed frustration that there was not more progress made in curbing excessive pay packages for bankers - particularly those employed by firms that have received billions of dollars in government support. Dominique Strauss-Kahn, the IMF chief, said: "There is broad agreement on what to do. The problem is we need to go beyond agreement. We need to have concrete measures. "I'm impressed by the level of consensus, but I'm still waiting for strong measures to be decided and also to be implemented at the national level." Public pressures Much of the public pressure before the meeting had centred on bank remuneration. At the start of Saturday's meetings, Gordon Brown, the British prime minister, said: "It is offensive to the public whose taxpayers' money, in different ways, has helped many banks from collapsing and is now underpinning their recovery." Finance leaders broadly agreed that banks ought to hold more capital to guard against the sort of losses that led to bank failures and bailouts. John Hilary, the executive director of the campaigning charity War on Want, told Al Jazeera: "The G20 have failed to recognise the serious impact of this economic meltdown around the world. "Tens of millions of people are being pushed into extreme poverty in the poorest countries and yet, what are they talking about? How rich our bankers should be. It just doesn't square up." The G20 said that emerging nations such as India and China would have greater say in the running of the IMF and the World Bank. Their voice in economic policymaking would grow "significantly" and "substantial progress" was to be made on the issue at a summit in Pittsburgh later this month. The BRIC group of leading emerging powers - Brazil, Russia, India and China - had laid out on Friday targets for how much movement they wanted in IMF and World Bank quotas.

Source: Agencies