Page last updated at 16:38 GMT, Tuesday, 24 March 2009

Bankers urge caution on G20 plans

Alistair Darling
Mr Darling wants bankers to back his plans for regulation

Banking leaders from around the world have told the UK prime minister and chancellor to go slow on banking reform ahead of the G20 summit next week.

Thirteen leading bankers warned Mr Brown against short-term measures that would undermine economic recovery.

The G20 summit, which brings together leaders of the world's leading economies, is expected to call for major reform of banking regulation.

But tough regulation could inhibit bank lending even further in the short term.

World leaders will meet next month in London to discuss measures to tackle the downturn. See our in-depth guide to the G20 summit.
The G20 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the US and the EU.

The bankers at the Downing Street meeting included the leaders of some of the world's most powerful banks, including Josef Ackermann of Deutsche Bank, William Winters of JPMorgan Chase, Nobuo Kuroyanagi of Japan's Mitsubishi UFJ, and John Varley of Barclays.

They heard a presentation from Lord Turner, the head of the UK's financial services authority, whose reform plan is widely seen as a blueprint for the G20's deliberations on financial regulation.

The bankers told Mr Brown "not to impose short-term actions that would undermine economic recovery or the bigger goals of medium-term reform", a spokesman said.

Growth concerns

Under Lord Turner's proposals, banks would have to hold more capital against risky loans, and build up a cushion in good times to guard against losses in a downturn.

But banks are worried that at the present time, any tougher measures would just inhibit lending further, thus crippling economic growth.

They are also facing calls for an international code to regulate bankers' bonuses and pay, with the aim of designing compensation schemes that do not encourage excessive risk-taking.

The G20 brings together the industrial and emerging market countries that make up 85% of the world economy.

The London summit is aiming to get global agreement on coordinated action to revive the world economy, to prevent future crises, and to direct more funds to help developing countries.

Disagreement has emerged over how much should be spent to boost global growth as well as how tough to be in regulating the banks.

Prime Minister Gordon Brown, who will be chairing the summit, has been having a series of meetings with key government leaders and private sector actors ahead of the summit on 2 April.

Last week, Mr Brown and Business Secretary Lord Mandelson met global business leaders, who urged them to act to restore bank lending.

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