26 Sep 2009

World leaders' plan to fix global financial system

9:49 pm on 26 September 2009

World leaders at the G20 summit in Pittsburgh have agreed to reform the international financial system to discourage excessive risk-taking and prevent a repeat of the global economic crisis.

What US President Barack Obama calls "tough new regulations" will require banks to hold more capital in reserve, and there will also be new rules on pay for bankers.

In their final statement, the G20 leaders said it was time to turn a page on an era of irresponsibility.

"Never again should we let the schemes of a reckless few put the world's financial system and our peoples' well-being at risk," Mr Obama said.

Despite this declaration, the BBC reports, the new rules on banks' capital reserves are short on specifics; nor is there an agreed cap on bonuses.

Mr Obama insisted however that the new plan would create a more stable international economy.

G20 replaces G8 as chief economic forum

The leaders agreed that the G20 will supersede the smaller G8 group of major industrial countries as the world's chief economic forum.

Australian Prime Minister Kevin Rudd, who has been pushing for such a move, says this is an historic day for Australia, as it now has a seat at the top decision-making table on world economic policy.

The G20 members are: Argentina, Australia, Brazil, Britain, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the United States.

They were joined in Pittsburgh by Spain, the Netherlands, the International Monetary Fund and the World Trade Organisation.

End to fossil-fuel subsidies agreed

The G20 also agreed to end fossil-fuel subsidies, saying it will help reduce carbon dioxide emissions.

Nearly $500 billion a year is spent worldwide on subsidising fuel prices, boosting demand in many nations by keeping prices artificially low and producing more emissions.

The leaders said eliminating such subsidies by 2020 would reduce greenhouse gas emissions by 10%. But they did not advance discussions about financial aid for developing nations dealing with climate change.