G20 hopes to develop stronger standards for financial system

11:56, November 08, 2009      

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The G20 policymakers emphasized the need for the Basel Committee to develop stronger standards by end-2010 to be phased in with the aim of implementation by end-2012 as financial conditions improve and the economic recovery is assured, according to the communique issued after the two-day G20 Finance Minister and Central Bank Central Governor Meeting was ended here on Saturday afternoon.

It is commonly believed that the shortage of supervision and regulation is a key factor leading to the happening of the global financial crisis. So the financial watchdogs within the G20 nations and international financial institutions have called for strengthening the system in order to prevent financial crisis from taking place again.

Thus, the G20 policymakers called on supervisors to ensure that banks retain, as needed, a greater proportion of their profits to build capital to support lending, said the communique.

Bank bonus has been a hot topic when a number of banks received aids from governments. In order to ensure that compensation policies and practices support financial stability and align with long-term value creation, "we commit to incorporate urgently within our national frameworks the FSB standards, and call on firms to implement these sound compensation practices immediately."

The FSB will start assessing implementation without delay and report back with further proposals, as required, by March 2010.

The G20 also called for the rapid development of internationally consistent, firm-specific recovery and resolution plans and tools by end-2010 in order to reduce the moral hazard posed by systematically important institutions.

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