Toronto: President Barack Obama entered the Group of 20 summit Saturday with added momentum for his push to increase bank capital standards: congressional action overhauling US fin-ancial regulations.
Obama arrived in Canada on Friday, the same day US lawmakers agreed on a compromise package of rules that would toughen capital standards for US financial companies. The deal strengthens Obama's hand as G20 leaders meet in Toronto following a gathering of the Group of Eight in Huntsville, Ontario.
"The progress that the US has made will be important in driving the world not just to agreements here but to conclusions on financial regulations within the kind of timeframe we've been looking at," Canadian Prime Minister Stephen Harper told reporters in Huntsville.
Poverty focus
G20 leaders have been split over how best to implement new standards, while agreeing on the general need for changes to avoid a repeat of the 2008 financial crisis. They also face opposition from banking officials such as BNP Paribas Chief Executive Officer Baudoin Prot, who warned that raising requirements too quickly would risk choking off lending.
"We had to show leadership to deal with the excessive risk-taking and the lack of adequate capital standards," said Stuart Eizenstat, former deputy Treasury secretary under President Bill Clinton. "Toronto is not going to be able to come up with 20 countries" with "one set of international standards but it will get us pointed in that direction so that at Seoul in November, there is really a good chance of an agreement."
The focus on Friday at the G8 was on an initiative to promote maternal and child health in poor countries. Harper late on Friday announced that the group — which includes Japan, Canada, the UK, France, the US, Italy, Germany and Russia — had agreed to commit $5 billion (Dh18.39 billion) over five years.
There was also talk of financial matters. In a preview of what he plans to press in Toronto, Obama talked about bank capital, an administration official said. And leaders including Harper and German Chancellor Angela Merkel congratulated Obama on the financial legislation, said the official, who briefed reporters on the condition of anonymity. Still, European leaders deflect any conversations about bank capital by bringing up regulation of tax havens, hedge funds, credit rating companies and compensation, US officials said this month on condition of anonymity.
Bailout costs
The G20 pledged in Pittsburgh to strengthen capital standards and find a way to make banks bear the costs of any government assistance. Earlier this month in Busan, South Korea, fin-ance ministers affirmed these commitments and their support for work by the Basel Committee on Banking Supervision.
The US has tried to broker a deal on bank levies that would bridge the gap among G20 members. Obama has proposed a limited-duration levy that would recoup taxpayer costs of the $700 billion Troubled Asset Relief Program, currently estimated at about $105 billion. The UK wants a revenue-raising tax on banks to help close its budget deficit, while Canada and Japan have been wary of any action on those lines.
Obama and Treasury Secretary Timothy F. Geithner are trying to bridge differences between bank-tax supporters such as England and Germany and those opposed, including Canada, China and Brazil. The US will push for a deal in which countries agree on the principle of shielding taxpayers from bank rescues.
