G-20 pushes to limit bankers' pay, profits

Updated 53m ago | Bloomberg News

World leaders gathering in Pittsburgh this month may take the biggest step to curbing the pay and profits of bankers after their economic policymakers narrowed differences over bonuses and capital rules.

Finance ministers and central bankers from the Group of 20 nations left weekend talks in London with a regulatory blueprint for a financial industry whose risk-taking triggered a global recession and required taxpayer-funded bailouts. The pledge to shore up the international financial system spurred European and Asian shares higher Monday.

"The G-20 has shown once again that governments from around the world can come together to agree on the global governance the new global economy needs," U.K. Prime Minister Gordon Brown said.

With the G-20 authorities vowing to sustain a nascent economic recovery, the U.S. and euro area found common ground on the push to revamp bank rules. The effort may still founder on trans-Atlantic divisions. The specifics are being written for the Sept. 24-25 summit in Pittsburgh to be chaired by President Obama.

Finance chiefs agreed that elements of a global pay code should include forcing banks to "claw back" cash awards if earnings falter; tying compensation to long-term performance and base pay; and disclosing more on what they hand top earners, according to a Sept. 5 statement.

Banks will also have to curb leverage and raise the amount and quality of assets kept in reserve once growth takes hold. They were also prodded to use profits to raise capital and lending.

The ministers left it to the Financial Stability Board, a Basel, Switzerland-based panel of regulators that the G-20 established five months ago, to flesh out the plan.

Separately, a panel of central bankers and regulators that oversees the Basel Committee on Banking Supervision on Sunday agreed on new standards calling for lenders to raise the quality of their capital, introduce a leverage ratio and find ways to boost reserves when the economy is strong.

"Capital requirements even during non-crisis periods have to have a larger buffer," former Federal Reserve chairman Alan Greenspan said Monday via satellite to a conference in Mumbai. "We do need significant changes. There's no substitute for capital."

The G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.

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