NEW YORK (Reuters) - Almost a year after the world’s financial system narrowly averted collapse, leaders from the Group of 20 rich and developing nations will gather in Pittsburgh on September 24-25 to discuss what happens next.
Here is a summary of progress reported so far on pledges the leaders made in the past year on measures to avert a repeat of future crises.
Central banks around the world have begun to debate how and when to phase out emergency steps taken to contain the damage wrought by the financial crisis, although most are not expected to begin exiting by withdrawing support until well into 2010.
Major central bank interest rates remain at record or historic lows and policymakers are cautious about a recent pick-up in economic growth.
The Bank of England unexpectedly extended its quantitative easing program by 50 billion pounds ($82 billion) last month.
The U.S. Federal Reserve is also buying debt to inject money into the economy, but it will wind down a $300 billion program to buy Treasuries by the end of October, and is not expected to increase the scale of a $1.45 trillion mortgage debt support campaign. The European Central Bank’s smaller program of buying 60 billion euros in covered bonds is on track for completion by the middle of next year.
BANK CAPITAL: G20 finance ministers want more and higher-quality capital as a cushion against losses, reducing need for taxpayer bailouts. US Treasury has an eight-point plan, while the Basel Committee on Banking Supervision is aiming for final agreement by end of 2010.
HEDGE FUNDS: More disclosure and accountability looks likely. Draft EU law under discussion would regulate hedge fund and private equity managers, leaving final say on rules to EU governments and European Parliament. Obama administration wants private capital pools to register with regulators.
DERIVATIVES: Central clearing of credit default swaps traded in EU began at end of July. United States wants to shift “standardized” over-the-counter derivatives onto exchanges, going beyond what EU currently proposing, while requiring more reporting for “customized” derivatives.
ACCOUNTING: Modifications to fair value rules seen as critical to resolving global toxic assets problem. International Accounting Standards Board (IASB) is fast tracking revision to scope of fair value rule to get key parts in force by the G20 deadline of end-2009. U.S. Financial Accounting Standards Board on slower track and differing approach to which assets should be at fair value.
SECURITISATION: EU has adopted law mandating banks retain 5.0 percent of securitized products they sell, with U.S. considering similar move.
CREDIT RATING AGENCIES: G20 wants them registered and supervised by the end of 2009. EU has adopted a law mandating registration and direct supervision. U.S. Securities and Exchange Commission and Congress eyeing changes.
FINANCIAL SUPERVISION: EU leaders have agreed to set up European Systemic Risk Board in 2010. New American framework for monitoring systemic risk still under debate, with Obama’s proposal to give job to Federal Reserve facing challenges.
PAY: U.S. Federal Reserve plans new bank pay curbs. U.S. House of Representatives has approved legislation that Obama administration supports, but Senate has not begun considering it. French President Nicolas Sarkozy has softened earlier rhetoric backing caps. Financial Stability Board recommends poorly capitalized banks should not be able to pay bonuses.
G20 countries have refrained from across-the-board tariff increases that many blamed for prolonging the 1930s Great Depression. But “there has been continued slippage toward more trade-restricting and distorting policies by many G20 countries,” concluded a recent joint report by the World Trade Organization, the Organization for Economic Cooperation and Development and the United Nations trade agency UNCTAD.
Leaders of the G8 and other major economies agreed in June to push for a conclusion in the long-running Doha round by the end of 2010. Earlier this month, India hosted a meeting of 30 trade ministers to discuss how to reach the target. The U.S. still says it needs much better market-opening offers from India, China, Brazil and others for there to be a deal.
G20 finance ministers meeting in London earlier this month made little progress on negotiating the issue of climate finance: how much industrial nations should contribute to help developing nations deal with global warming.
U.S. President Barack Obama had tasked G20 finance ministers with reporting back to the Pittsburgh summit. Rich and poor nations are divided over how much money should be put on the table and how to spread out emissions reduction curbs.
In July, G8 countries committed to cut their emissions by 80 percent by 2050. All major emitters referred to a target to limit global warming to no more than 2 degrees centigrade.
G8 countries have agreed an ambition to halve global greenhouse gas emissions by 2050. Developing countries continue to resist that target.
G20 leaders in April agreed to accelerate reforms including increasing IMF surveillance of the global economy and giving major emerging economies more voting power. Not much progress.
The U.S. hoped for an agreement at the G20 meeting in Pittsburgh on moving the voting issue forward and proposed a 5.0 percent shift in voting power for “dynamic” emerging markets countries. Brazil, Russia, India and China responded by proposing a 7.0 percent shift.
European Union leaders last week dismissed a U.S. call to reduce the IMF’s board, which would likely shrink Europe’s seats, but expressed openness at voting reforms.
China has called on the G20 to throw its support behind the voting reform effort, but G20 sources said no detailed talks on voting rights would be held in Pittsburgh.
G20 leaders pledged in April to boost IMF resources by another $500 billion and sell about 400 tonnes of IMF gold to raise money for the poorest countries. All of the money has been raised, with Russia, China, India and Brazil agreeing to contribute through IMF note purchases, the first time the IMF has issued bonds to central banks to raise money.
European Union leaders reiterated a commitment to increase the bloc’s contribution to IMF funds to 125 billion euros ($184 billion) from 75 billion pledged in March.
The U.S. Congress has endorsed the gold sale, allowing the Fund to move ahead with plans to sell it within a new European central bank gold agreement struck in August.
The G20 agreed in April to provide $250 billion worth of IMF Special Drawing Rights to all 186 member countries to boost global liquidity. The allocation became effective on August 28. Emerging and developing countries received almost $100 billion in SDRs, of which close to $18 billion went to poor countries.