Page last updated at 10:26 GMT, Wednesday, 23 September 2009 11:26 UK

UK 'blocking tough finance rules'

Peer Steinbrueck
Mr Steinbrueck wants more restrictions on the banking sector

German Finance Minister Peer Steinbrueck has accused the UK of blocking tougher financial rules ahead of the G20 summit.

"There clearly is a lobby in London that wants to defend its competitive advantage tooth and claw," Mr Steinbrueck told Stern magazine.

Germany and France have led calls for more restrictions on banks, which have been resisted by the US and UK.

But the UK Treasury told the BBC the UK was not blocking more regulation.

The leaders of the richest 20 nations will discuss reforming the global economy when they meet in Pittsburgh later this week.

London opposition

The UK has "particular difficulties" regulating hedge funds "to put it politely", Mr Steinbrueck told the weekly German news magazine.

Politics at times is like a train engine, it's slow to get up to speed
Peer Steinbrueck, German finance minister

He said the financial sector accounted for 15% of the UK's gross domestic product (GDP) in contrast to just 6% in Germany.

However, a spokesman for the UK Treasury told the BBC the finance sector accounted for 8% of UK GDP, not 15%.

Despite the debates leading up to the summit, Mr Steinbrueck was confident that there would be progress at the G20 meeting.

"Politics at times is like a train engine, it's slow to get up to speed, but it can pull more and more people along," he said.

"We will deeply change the rules of the game for financial markets."

He said he did not want to have to go through the experiences of the past year again.

"Back then, the stick of dynamite nearly blew up in our faces," Mr Steinbrueck said.

UK proposals

There has been much debate about how to reform the financial services sector of the global economy after the banking crisis a year ago.

Leaders of the world's biggest economies will gather in Pittsburgh on Thursday and Friday for the latest G20 meeting in the wake of the global financial crisis
Our Q&A explains what to expect
See whether they are fulfilling the pledges made at the last meeting in London
This time they will be deciding what limits should be put on bankers' bonuses
For full coverage of the G20 and the global recession go to our in-depth guide

The UK Treasury said the UK was at the forefront of efforts to change the global banking sector.

"The UK government has led the international efforts to end the risky pay and bonus culture in the global banking industry," a Treasury spokesman told the BBC.

"Our proposals for clawback and deferral of bonuses in addition to much greater transparency have become the international blueprint for reform."

The UK and US have been resistant to calls for restrictions and to mandatory caps on banker bonuses, as proposed by France.

Instead, they have proposed deferring bonuses for several years and allowing banks to take bonus payments back in the event a bank later runs into trouble - both policies designed to reduce the incentive for risky lending.

"We will continue to work with other nations - including our G20 partners in Pittsburgh this week - to make sure pay policies are structured in the long-term interests of financial stability," the spokesman added.


This week's G20 summit in the US will also call for major reforms to promote a more balanced global economy.

This would see countries in Europe and the US save more, and countries that are fast growing such as India and China spend more to boost global growth.

A draft document seen by the BBC says huge imbalances in the global economy must be ironed out.

But Brazil, one of the leading emerging economies, was unenthusiastic about the draft statement.

"The way it is, this proposal is obscure and we do not agree with it," Brazil's Finance Minister Guido Mantega said.

He said the G20 should focus on monitoring the financial system, performing stress tests to determine whether banks need more capital.

Indian Prime Minister Manmohan Singh also said the G20 needed to deliver a strong message against protectionism in trade and international financial flows.

Mr Steinbrueck said he was in favour of a levy - known as a Tobin Tax - to be applied to every financial transaction to discourage risky lending and pay for

"It can't be the case that citizens have to shoulder the cost, even though they did not cause the crisis. That's why we have to ensure the financial sector makes a contribution."

"Every euro that we can collect on financial markets will provide relief for tax payers," Mr Steinbrueck added.

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