Wednesday, November 10, 2010

The G20 blinks

The G20 meeting should be starting in a few hours.

But I am alrady disappointed.

I believe that the G20 is set to defer a decision on whether there should be a globally set capital surcharge for systemically important banks.

That means that such surcharges will vary from country to country, and many countries will not have such surcharges at all - incentivising banks to move their activities to countries with no surcharge. Which, in turn, will create pressure, even in countries which do have surcharges, for doing away with surcharges.

The whole debate about "too big to fail" banks seems to have ended in the creation of banks that are much bigger than they were before the crisis and with no global mechanism for avoidng taxpayer bailouts of such firms.

It looks as if politicians and regulators around the world have abandoned efforts to reform the system.

Of course, things could still change during the summit. But if everything goes as the agenda suggests, look out for even more volatility and vulnerability in the global economy. A huge opportunity for putting at least one key matter in the the global financial system on a sensible basis appears to have been lost. Sphere: Related Content

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