G20 leaders seek to curb banker bonuses
Leaders of developed and developing nations gathered in Pittsburgh had earlier indicated a broad consensus on the issue -- a highly symbolic one for angry taxpayers.Pittsburgh -- World leaders will agree that bankers' bonuses should be linked to long-term success, not short-term risky behaviour, a draft text from the Group of 20 summit said Friday.
The document speaks of "limiting bonuses to a percentage of total net revenues when it is inconsistent with maintenance of a sound capital base," a G20 source said, quoting from the draft expected to be adopted later Friday.
Leaders of developed and developing nations gathered in Pittsburgh in the east of the United States had earlier indicated a broad consensus on the issue -- a highly symbolic one for angry taxpayers.
"We actually are very close and I believe we are in the same place," US Treasury Secretary Timothy Geithner told reporters. "We want to have very strong standards to limit the risk."
Prime Minister Fredrik Reinfeldt of Sweden said: "I expect the G20 will make a clear statement about the need for global rules on bonuses and compensation, and I also expect broad agreement on how to strengthen supervision in general.
Reinfeldt, whose country holds the rotating presidency of the European Union, said leaders were "very worried" banks seemed to be returning to bad habits already and "seem to think it's time to go back to business as usual.
"The idea that banks should be able to keep profits for themselves but give losses to taxpayers will not be accepted," he warned.
Ahead of the summit, French and German officials had insisted on the importance of restricting bonuses -- despite US and British worries that it could hit the major financial services sectors in their countries.
Germany's Chancellor Angela Merkel met with France's President Nicolas Sarkozy before both of them went on to the leaders' dinner hosted by US President Barack Obama.
Following the pair's 30-minute meeting, a German official said: "They have coordinated their positions seamlessly. The central issue for Merkel and Sarkozy is the regulation of the financial markets.
"On this issue there is complete consensus," he said.
Last week, European leaders agreed not to push immediately for the fixed caps that some of them wanted on bonuses -- an idea rejected in London and Washington -- but agreed on measures to link pay to long-term performance.
Australia's finance minister, Treasurer Wayne Swan, said he expected a report to the G20 on executive bonuses to include tough rules.
"I think there is going to be a rigorous framework outline, which is important because some of the packages have encouraged very risky behaviour which goes to the core of some of the issues in the financial system," he said.
Prime Minister Kevin Rudd said the issue was critical for his country.
"The remuneration structures and how they're calibrated in various markets around the world have a profound impact on Australia," Rudd told a joint news conference with Swan after addressing students at Carnegie Mellon University.
"With large banks operating globally, if you do not have a proper calibration of risk and reward, then if those decisions are being regulated outside Australia and using a set of standards vastly different from what we would accept in Australia, then we have a problem."
The G20 leaders, representing the world's 19 largest developed and emerging economies plus the European Union, met for dinner on Thursday before holding a full day of talks Friday on ways to safeguard the tentative economic recovery.