G20 summit: Leaders target bankers

G20 summit: Leaders target bankers
World leaders will agree unprecedented global restrictions on pay and bonuses for bankers at the G20 summit in London.

By Andrew Porter, Robert Winnett and Christopher Hope
Last Updated: 12:07AM BST 02 Apr 2009

In future, bankers will be prevented from receiving multi-million pound cash bonuses for speculating on the stock market.

Their remuneration will instead be based on the risks they take over the long term. Bankers deemed to be making risky investment decisions will only be paid in shares that can be cashed in after several years.

Sarkozy and Merkel demand tough market curbs The multi-million-pound bonuses paid to bankers have been blamed for encouraging them to take the "reckless" decisions that triggered the global financial crisis.

The Daily Telegraph has learnt that the remuneration deal was thrashed out over the past few days following intensive diplomatic efforts by Nicolas Sarkozy, the French President, and Angela Merkel, the German Chancellor. The measure did not appear in a draft communiqué that was leaked at the weekend.

The European leaders were understood to have pushed for an exact monetary limit on banking pay but were prepared to sign up to the new, strongly-worded agreement.

Regulators in each of the G20 countries will impose the new restrictions, which cover both private banks and those owned both wholly and partially by the state.

The agreement will be the most eye-catching part of the communiqué, which is expected to be released by G20 leaders at the summit in London's Docklands on Thursday.

On Wednesday, violent clashes took place in the capital between police and anti-capitalism protesters ahead of the talks. In the City of London, a branch of Royal Bank of Scotland was attacked and looted as violence flared during a 6,000-strong protest, which resulted in 32 arrests.

A man died after he collapsed at the scene of protests near the Bank of England last night.

A protester called the police after they saw the man collapse and stop breathing in St Michael’s Alley, near Birchin Lane just off Cornhill shortly before 7.30pm.

Two police medics broke through the cordon and carried the man to a clear area in front of the Royal Exchange where they gave him CPR.

The ambulance arrived six minutes later and took him to hospital just before 8pm, where he was pronounced dead.

A Scotland Yard spokesman said: “The officers took the decision to move him as during this time a number of missiles - believed to be bottles - were being thrown at them.”

It is believed that the man died of a heart attack.

The Directorate of Professional Standards at both the MPS and City of London Police have been informed. The IPCC is also being told.

Meanwhile, frantic negotiations between the teams of G20 officials continued and there were more than five draft versions of the final agreement in circulation.

Other measures to rein in offshore tax havens, regulate hedge funds and offer new trade credit to the developing world are also expected to be announced.

The International Monetary Fund will increase its funding by hundreds of billions of dollars. The money will be used to bail out countries whose economies face financial meltdown.

However, critics of the G20 summit were expected to point to the lack of a new co-ordinated fiscal stimulus package, something that Gordon Brown, the Prime Minister, and President Barack Obama had originally hoped would be included.

Mr Brown and Mr Obama said that the new financial system to emerge from the crisis would have to be different from that which led to the economic collapse of last year. However, both leaders expressed optimism that the crisis could be tackled this year. Mr Obama urged the world not to "short change the future" because of fear over the current economic crisis. At a joint press conference with Mr Brown at the Foreign Office, the President said people needed to plan for a recovering economy.

He said: "Despite the current hardships, we are going to get through this. So you should plan sensibly in anticipation that this economy is going to recover.

"Young families are going to want to buy new homes and sooner or later that clunker of a car is going to wear out, so people will buy new cars. I would ask people to have confidence about their futures and that may mean in some cases spending now as investments for the future. Don't short change the future for fear of the present."

In words that echoed Franklin D Roosevelt, the US president at the time of the Great Depression, Mr Obama said: "Basing decisions around fear is not the right way to go."

Mr Brown also called for global action. "It will get worse if we do not act. The option of doing nothing is not available to us," he said. "I believe that the degree of international co-operation that we can get will determine how quickly all our economies can recover.''

Downing Street was confident that a G20 agreement was close following public posturing from the French and German governments.

Earlier this week, Mr Sarkozy, the French president, threatened to walk out of the summit if firm commitments were not made.

On Wednesday, he staged a joint press conference with Angela Merkel at which they insisted there were "red lines" which were not negotiable.

The two European leaders have called for tough global regulation of the financial system, rather than vague pledges.

Mrs Merkel said there was no option to go back for a third summit if decisions proposed in Washington at the end of last year resulted in only a vague statement of intent in London.

The German Chancellor said: "The day after tomorrow will be too late. The decisions need to be taken now, today and tomorrow." She added: "We should not be content with generalisation ... Speculation must be regulated and there must be a framework for pay at the banks."

Mr Sarkozy also said that remuneration paid to traders must be controlled. "It's not a question of morality, all of this is a red line. The problems must be clearly resolved."

British officials believe that the emerging bank pay agreement will help temper European concerns.

The Prime Minister will hail the move as the first time that governments have agreed to regulate the risk-and-reward culture that many leaders blame for the banking collapse.

The G20 leaders will agree to sign up to a new set of principles which can curb, if not cap, bankers salaries. The aim is to ensure that there is no chance that the system of remuneration can ever get out of control again.

It is understood that a report by Lord Turner, the chairman of the Financial Service Authority, which made recommendations on bankers pay, will help to guide the new principles that are also endorsed by the Financial Stability Forum, a global coalition of regulators and watchdogs.

In future, each bank will have to judge the risks taken by individual traders or executives. Only those taking average, or below average risks, will receive cash bonuses.

Those taking more risk, will be paid in shares or other financial instruments which cannot be cashed in for several years. Banks could only circumvent the rules by setting aside large amounts of extra capital to reflect the extra risks being taken.

The French president, threatened to walk out of the summit if firm commitments were not made.

On Wednesday, he staged a joint press conference with Mrs Merkel at which they insisted there were "red lines" which were not negotiable.

The two European leaders have called for tough global regulation of the financial system, rather than vague pledges.

Mrs Merkel said there was no option to go back for a third summit if the measures proposed in Washington at the end of last year resulted in only a vague statement of intent in London.

The German Chancellor said: "The day after tomorrow will be too late. The decisions need to be taken now, today and tomorrow."

She added: "We should not be content with generalisation . . . speculation must be regulated and there must be a framework for pay at the banks."

Mr Sarkozy also said that remuneration paid to traders must be controlled. "It's not a question of morality, all of this is a red line. The problems must be clearly resolved."

British officials believe that the emerging bank pay agreement will help temper European concerns.

The Prime Minister will hail the move as the first time that governments have agreed to regulate the risk-and-reward culture that many leaders blame for the banking collapse.

The G20 leaders will agree to sign up to a new set of principles which can curb, if not cap, bankers' salaries. The aim is to ensure that there is no chance that the system of remuneration can ever get out of control again.

Mr Brown said: "We are within a few hours, I think, of agreeing a global plan for economic recovery and reform.

"Of course it is difficult and of course it is complex – we have a large number of countries – but I am very confident that people not only want to work together but we can agree a common global plan for recovery and reform."

It is understood that a report by Lord Turner, the chairman of the Financial Services Authority, which made recommendations on bankers' pay, will help to guide the new principles that are also endorsed by the Financial Stability Forum, a global coalition of regulators and watchdogs.

In future, each bank will have to judge the risks taken by individual traders or executives. Only those taking average, or below average risks, will receive cash bonuses.

Those taking more risk, will be paid in shares or other financial instruments, which cannot be cashed in for several years.

Banks could only circumvent the rules by setting aside large amounts of extra capital to reflect the extra risks being taken.

http://www.telegraph.co.uk/finance/financetopics/g20-summit/5091306/G20-summit-Leaders-target-bankers.html