Finance Minister Warns G20 Ministers to Be Watchful of Banks’ Risky Choices
Finance Minister says G20 ministers need to focus on keeping banks from making the risky choices that triggered global recession.
Finance Minister Jim Flaherty says that G20 minister must keep their focus on helping banks to avoid the precarious choices that were made that sparked a global recession, urging his counterparts not to become distracted by pointed separations over the global bank tax, instead paying attention to the behavior of banks.
Speaking from Busan during a two-day summit of G20 finance ministers and central bankers that Flaherty says has thus far been ruled by worries over economic affairs in Europe, Flaherty advised cautious monitoring of banks in order to stave off economic decline. It is expected that during both large meetings and smaller one-on-one meetings with other global economic leaders that Flaherty will be able to get a clearer feeling on what the G20 member countries agree and disagree about prior to the Toronto summit of G20 heads that is scheduled for June.
Canada was one of the earliest and most vocal critics of the proposed bank tax coming from the United States and Europe. Flaherty has said that his recent travels have revealed to him that if there is any impetus in the debate, it tends to run towards opposition of the tax, not support.
Flaherty told Canadian news media in advance of the summit’s opening dinner that, “On bank levies, there is no consensus. As a general rule of thumb, you can assume that a country that did not have to use taxpayers’ money to bail out its banks is not supportive of imposing a levy ex ante on its banks, and I’ve had these discussions in India, China, and last week in South America.”
Flaherty went on to say that the G20 is trying to engineer general principles that all members can support, with the “key element” being “quantity and quality of capital and caps on leverage and not be distracted by other issues.”
Canada is a co-chair of this meeting alongside South Korea because it hosts the G20 later this month. The next G20 leader’s summit will be held in November in Seoul, South Korea. This meeting is the last chance that G20 members have to determine if they will have any announcements to make when they get to Toronto. This may prove futile, as agreement on major issues may be months away, assuming an agreement can be reached at all.
That is largely due to the fact that the September 2009 meeting of the 20 in Pittsburg, Pennsylvania, U.S., saw the members giving themselves until late in 2010 to work through the issues that separate them. The Toronto meeting scheduled for June is just one curve in the road on the way to Seoul, even though the summit will run up a $1 billion tab for security.
Among the discussion topics that are scheduled to be cleared up at November’s meeting in Seoul are those that are on the agenda this weekend among the G20 in Busan.
The G20 central bankers and finance ministers received a new report from the International Monetary Fund over dinner on Friday night. This report on the state of the global economy will lead to a debate over how and when to “unwind” from the immense stimulus spending that was earmarked to ease the recession’s impact. At the start of the recession, the G20 vowed to act together with stimulus packages, but stimulus exist strategy is a bit more complex as the member countries are all facing different problems and issues. Some countries are reporting high growth while Europe is encompassed in a full-blown crisis of debt. The troubles in Greece and other indebted European countries dominated conversations prior to the meeting, according to Flaherty. Flaherty says that it is vital to continued recovery that European banks are fixed.
Saturday’s meeting will discuss the future of the G20, new banking reforms that relate to rules on liquidity and capital, reforming of international financial organizations like the World Bank and the IMF, and the “global safety net”, which is the official name for the debate over bank tax.
The United States and Europe like the idea of the bank tax, but Canada is campaigning against it, wanting instead for banks to build up their own reserves of capital in the event of another “credit meltdown”.
The G20’s meeting is expected to close with a session on other issues that may include phasing out tax incentives for the gas and oil industry.
