G-20 agrees to control bankers' bonus

S Kalyana Ramanathan / London September 06, 2009

Finance ministers of the world’s 20 largest economies, including India, today agreed on the need to have an “institutional cap” on bonuses paid to bankers. At the conclusion of a day-long G-20 finance ministers’ meeting here today, the nations agreed on more disclosures and transparency in the level and structure of remuneration along with global standards on pay structure, including deferral, effective clawback, relationship between fixed and variable remuneration, and guaranteed bonuses.

Based on today’s deliberations, the Financial Stability Board (FSB) will report to the Pittsburgh Summit, which is scheduled to meet on September 24 and 25, with detailed specific proposals for developing this framework, which could be incorporated into supervisory measures and closely monitored, said a G-20 communique.

The final implementation of the cap on bonuses will, however, vest with the financial regulator in each country — in India’s case, this could be the Reserve Bank of India.

Addressing the media at the end of the meet, Alistair Maclean Darling, chair of today’s meeting and the UK's Chancellor of the Exchequer (equivalent of a finance minister), said there was no plan to implement a cap on bonuses of individual bankers. He said from a practical viewpoint, it would be impossible to do so as bankers would ultimately find a way to reward themselves in some other way. He, therefore, said the bonus issue in banks must be tackled as a function of the risks that came with it and a “cap on the pool” must be framed in a way that did not jeopardise the future of the institutions due to reckless risk-taking by bankers. A UK-based global chairty organisation, in a statement here, said, “It is disappointing that the G-20 finance ministers put the issue of bankers’ bonuses ahead of the needs of the millions of poor people suffering as a result of the economic crisis. If the G-20 was serious about making banks work for ordinary people, they would have agreed to a global tax on currency transactins.”

Bric FMs demand IMF quota shift to emerging economies

S Kalyana Ramanathan / London September 05, 2009


Photo caption:
Indian finance minister Pranab Mukherjee, Brazil's Guido Mantega, China's Xie Xuren and Russia's Alexey Kudrin committed more financial support for IMF and World Bank but also reiterated the group's demand for higher quota (and voting powers) in these two international financial institutions. (Photo by: S Kalyana Ramanathan)

Hours ahead of the G-20 finance ministers’ meet in London tomorrow, the representatives of the Bric nations (Brazil, Russia, India and China) today said they were willing to commit a total of $80 billion to the International Monetary Fund and the World Bank, but also demanded a substantial shift of quotas and shares in favour of emerging markets — 7 per cent in IMF and 6 per cent in World Bank — by doubling from the current levels.


“For IMF and World Bank Group, the main governance problem, which severely undermines their legitimacy, is the unfair distribution of quotas, shares and voting power. Priority should be given to a substantial shift of quotas and shares in favour of emerging market and developing countries,” the Bric nations said in a communique issued here today.

After the April 2009 meeting of leaders of G-20 nations, the finance ministers of these countries will meet here tomorrow to take stock of the world economic situation and agree on the future course of action to maintain the momentum of exit from a two-year global recession. The meeting will culminate in the G-20 Nations’ leaders meet in Pittsburgh, United States on September 24 and 25.

The Bric finance ministers also agreed that the the world has overcome its most serious economic crisis since the 1930 Great Depression and many of the G-20 members are on the way to a complete recovery.

Of the $80 billion of funding committed by these four countries to IMF and World Bank, India will contribute $10 billion, said its finance minister, Pranab Mukherjee. China, with a commitment to pump in $50 billion to IMF and World Bank, will the largest contributor from this group.

Meanwhile, Mukherjee said he was hopeful of 6-7 per cent growth in 2009 and 2010. He said India would continue its domestic fiscal support of 3-4 per cent of GDP through 2008-09 and 2009-10.