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WASHINGTON, Sept 2 (Reuters) - U.S. Treasury Secretary Timothy Geithner said on Wednesday he will set out principles for a new global accord to constrain the excessive use of leverage by banks.
Speaking ahead of a meeting on Friday and Saturday in London of G20 finance chiefs, he emphasized he was not seeking an immediate agreement and said it was too soon to clamp down on the financial sector as it struggles to return to normal lending.
“We’re going to be outlining a framework of principles to begin a discussion -- not to reach agreement on -- but to discuss a framework of principles on a new international capital accord that will put in place, once the crisis is behind us, a more conservative framework of constraints on leverage in the financial sector across the major globally active financial institutions,” Geithner told reporters.
The U.S. Treasury chief said the global economy has been pulled back “from the edge of abyss” in the past year and was showing early signs of resuming growth but said it was too early to let up on efforts to get sustained recovery going.
“We’ve come a very long way. We have a very long way to go still,” Geithner said, a sentiment that other G20 countries similarly expressed ahead of the meeting.
The London gathering will set an agenda for a meeting in Pittsburgh on Sept. 24-25 of political leaders from the same countries, drawing the old-line industrial powers and key emerging-market economies into a closer accord.
Geithner said the Obama administration remained committed to enacting fundamental reforms that will strengthen the financial system and lessen risks of a repeat of the crisis that ravaged Americans’ job prospects and incomes over the past two years and said he hoped other countries also stood firm.
“We have moved exceptionally early in the United States to put out broad proposals and detailed legislative language on comprehensive reforms to create a system that provides much stronger consumer protection and the prospect of a much more stable and less vulnerable financial system,” he said.
“It’s very important to us that the rest of the world move too,” Geithner said. “These are global markets and our reforms here will not be effective...unless they’re complemented by sufficiently ambitious efforts by the rest of the other major economies.” (Additional reporting by Emily Kaiser; Editing by Leslie Adler)
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