G20 nations agree to ‘tough new regulations’

At last week’s G20 summit, the world’s leading nations agreed to “tough new regulations”.

Following the summit, which took place in Pittsburgh on Thursday and Friday, US President Barack Obama announced that in order to prevent another financial crisis: “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.”

“Going forward, we cannot tolerate the same old boom-and-bust economy of the past,” he added.

Mr Obama added: “We have taken bold and concerted action to forge a new framework for strong, sustainable and balanced growth.”

In the meantime, bankers’ bonuses were always set to be high on the agenda at the summit. Bank bonuses have been the subject of heavy criticism of late since it is banks that are being blamed for the financial crisis.

The G20 nations agreed that payments can be ‘clawed back’ if a bank makes a loss. Bonuses will also be aligned with both performance and risk and disclosure requirements will be tougher.

Furthermore, bonuses should not be higher than a certain percentage of a bank’s revenue.

However, there was no agreement that bonuses should be capped. France had earlier suggested the idea at the meeting of G20 finance ministers this month but it was rejected by other ministers after UK Chancellor Alistair Darling dismissed them as “unenforceable”.

As a result of the new guidelines on bonuses, this weekend Mr Darling met with Richard Broadbent, head of Barclays’ remuneration committee, Colin Buchan from Royal Bank of Scotland, Sir Mark Moody-Stuart of HSBC and Wolfgang Berndt from Lloyds Banking Group.

According to The Sunday Times, the chairman of the remuneration committees of Britain’s four largest banks were summoned by the Chancellor to show he means business and that banks must stick to the new rules.

In the meantime, Prime Minister Gordon Brown told the BBC’s Andrew Marr Show, that the tough new measures on banks will force banks to act in a more responsible manner.

Mr Brown said: “We are not going to stand by and return to the bad old days.”

As a result, in the next few weeks, the Government is to bring a new Business and Financial Services Act to parliament.

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