PITTSBURGH (Reuters) - The following are highlights of the G20 draft statement:
------------------------------------------------------
A FRAMEWORK OF STRONG, SUSTAINABLE AND BALANCED GROWTH:
"In the short-term, we must continue to implement our stimulus programs to support economic activity until recovery clearly has taken hold," the draft said. "We also need to develop a transparent and credible process for withdrawing our extraordinary fiscal, monetary and financial sector support, to be implemented when recovery becomes fully secured."
The draft said G20 members will agree on shared policy objectives, which should be updated as conditions evolve.
Members will set out medium-term policy frameworks and will work together to assess collective implications of national policy frameworks for the level and pattern of global growth and identify potential risks to financial stability.
G20 leaders will consider, based on the result of mutual assessment, and agree any actions to meet the common objectives.
The statement said the policy will only be successful if it is supported by candid, even-handed and balanced analysis of policies. It asked the IMF to assist finance ministers and central bank governors in this process.
Finance ministers and central bank governors will elaborate this process at their November meeting and members will review the results at the next G20 summit.
The annex to the statement added that G20 will implement responsible fiscal policies, strengthen financial supervision, promote more balanced current accounts, support open trade and investment and reject protectionist measures.
The annex also said G20 will:
- "Undertake monetary policies consistent with price stability in the context of market oriented exchange rates that reflect underlying economic fundamentals."
-"G20 members with sustained, significant external deficits pledge to undertake policies to support private savings and undertake fiscal consolidation while maintaining open markets and strengthening export sectors."
- "G20 members with sustained, significant external surpluses pledge to strengthen domestic sources of growth." This could include increasing investment, reducing financial markets distortions, boosting productivity in service sectors, improving social safety nets and lifting constraints on demand growth.
-----------------------------------------------------
STRENGTHENING THE INTERNATIONAL FINANCIAL REGULATORY SYSTEM
"A return to the excessive risk taking prevalent in some countries before the crisis is not an option," the statement said.
It said that despite progress in oversight and risk management much more needed to be done to prevent a crisis of a similar magnitude from happening again, listing higher capital standards, curbs on leverage and reforming pay schemes as key action points.
"We commit to developing by end-2010 internationally agreed rules to improve both the quantity and quality of bank capital and to discourage excessive leverage. These rules will be phased in as financial conditions improve and economic recovery is assured with the aim of implementation by end-2012."
The draft said it supported the introduction of a leverage ratio as an additional measure to the Basel II capital framework and that all major G20 capital centers committed to adopt that framework by 2011.
On financial sector compensation, the draft said the G20 fully endorsed the standards of the Financial Stability Board "aimed at aligning compensation with long-term value creation, not excessive risk taking."
Those would include:
- avoiding multi-year guaranteed bonuses
- requiring a significant portion of bonuses to be deferred and tied to performance and "subject to appropriate clawback."
- ensuring that compensation for senior executives and employees whose actions affect the firms risk exposure are linked to performance and risk
- making firms' compensation policies transparent
- limiting bonuses as a percentage of net revenues when "it is inconsistent with the maintenance of a sound capital base."
- ensuring that compensation committees are able to act independently.
"We call on firms to implement these sound compensation practices immediately," the draft said.
It said that all standardized derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties, by the end of 2012 at the latest and called on international accounting bodies to develop a single set of standards by June 2011.
------------------------------------------------------------
REFORMING THE MANDATE, MISSION AND GOVERNANCE OF THE IMF
Modernizing the IMF's governance is a core element of the G20 efforts to improve the IMF's credibility, legitimacy and effectiveness, the draft said.
The IMF should remain a quota-based organization and the distribution of quotas should reflect the relative weights of its members in the world economy, which have changed substantially in view of the strong growth in dynamic emerging market and developing countries.
"To this end, we are committed to a shift in quota share to dynamic emerging market and developing countries of at least five percent from over represented to under-represented countries using the current IMF quota formula as the basis to work from. On this basis and as part of the IMF's quota review, to be completed by January 2011, we urge an acceleration of work toward bringing the review to a successful conclusion."
It said a number of issues need to be addressed, including the size of increase in IMF quotas, the size and composition of the Executive Board and ways of enhancing the board's effectiveness and the Fund Governors' involvement in strategic oversight of the IMF.
------------------------------------------------------
A FRAMEWORK OF STRONG, SUSTAINABLE AND BALANCED GROWTH:
"In the short-term, we must continue to implement our stimulus programs to support economic activity until recovery clearly has taken hold," the draft said. "We also need to develop a transparent and credible process for withdrawing our extraordinary fiscal, monetary and financial sector support, to be implemented when recovery becomes fully secured."
The draft said G20 members will agree on shared policy objectives, which should be updated as conditions evolve.
Members will set out medium-term policy frameworks and will work together to assess collective implications of national policy frameworks for the level and pattern of global growth and identify potential risks to financial stability.
G20 leaders will consider, based on the result of mutual assessment, and agree any actions to meet the common objectives.
The statement said the policy will only be successful if it is supported by candid, even-handed and balanced analysis of policies. It asked the IMF to assist finance ministers and central bank governors in this process.
Finance ministers and central bank governors will elaborate this process at their November meeting and members will review the results at the next G20 summit.
The annex to the statement added that G20 will implement responsible fiscal policies, strengthen financial supervision, promote more balanced current accounts, support open trade and investment and reject protectionist measures.
The annex also said G20 will:
- "Undertake monetary policies consistent with price stability in the context of market oriented exchange rates that reflect underlying economic fundamentals."
-"G20 members with sustained, significant external deficits pledge to undertake policies to support private savings and undertake fiscal consolidation while maintaining open markets and strengthening export sectors."
- "G20 members with sustained, significant external surpluses pledge to strengthen domestic sources of growth." This could include increasing investment, reducing financial markets distortions, boosting productivity in service sectors, improving social safety nets and lifting constraints on demand growth.
-----------------------------------------------------
STRENGTHENING THE INTERNATIONAL FINANCIAL REGULATORY SYSTEM
"A return to the excessive risk taking prevalent in some countries before the crisis is not an option," the statement said.
It said that despite progress in oversight and risk management much more needed to be done to prevent a crisis of a similar magnitude from happening again, listing higher capital standards, curbs on leverage and reforming pay schemes as key action points.
"We commit to developing by end-2010 internationally agreed rules to improve both the quantity and quality of bank capital and to discourage excessive leverage. These rules will be phased in as financial conditions improve and economic recovery is assured with the aim of implementation by end-2012."
The draft said it supported the introduction of a leverage ratio as an additional measure to the Basel II capital framework and that all major G20 capital centers committed to adopt that framework by 2011.
On financial sector compensation, the draft said the G20 fully endorsed the standards of the Financial Stability Board "aimed at aligning compensation with long-term value creation, not excessive risk taking."
Those would include:
- avoiding multi-year guaranteed bonuses
- requiring a significant portion of bonuses to be deferred and tied to performance and "subject to appropriate clawback."
- ensuring that compensation for senior executives and employees whose actions affect the firms risk exposure are linked to performance and risk
- making firms' compensation policies transparent
- limiting bonuses as a percentage of net revenues when "it is inconsistent with the maintenance of a sound capital base."
- ensuring that compensation committees are able to act independently.
"We call on firms to implement these sound compensation practices immediately," the draft said.
It said that all standardized derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties, by the end of 2012 at the latest and called on international accounting bodies to develop a single set of standards by June 2011.
------------------------------------------------------------
REFORMING THE MANDATE, MISSION AND GOVERNANCE OF THE IMF
Modernizing the IMF's governance is a core element of the G20 efforts to improve the IMF's credibility, legitimacy and effectiveness, the draft said.
The IMF should remain a quota-based organization and the distribution of quotas should reflect the relative weights of its members in the world economy, which have changed substantially in view of the strong growth in dynamic emerging market and developing countries.
"To this end, we are committed to a shift in quota share to dynamic emerging market and developing countries of at least five percent from over represented to under-represented countries using the current IMF quota formula as the basis to work from. On this basis and as part of the IMF's quota review, to be completed by January 2011, we urge an acceleration of work toward bringing the review to a successful conclusion."
It said a number of issues need to be addressed, including the size of increase in IMF quotas, the size and composition of the Executive Board and ways of enhancing the board's effectiveness and the Fund Governors' involvement in strategic oversight of the IMF.