HIGHLIGHTS - G20 draft statement

Published: 25 Sep 2009 02:20:16 PST

PITTSBURGH, Sept 25 - 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.

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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 centres 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 standardised 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 organisation 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.

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ENERGY SECURITY AND CLIMATE CHANGE

The draft said the group pledged to:

- increase global energy market transparency and market stability by publishing timely data on oil production, consumption, refining and stockpile levels, ideally on a monthly basis, from January 2010

- improve regulatory oversight of energy markets, including calling on regulators to collect data on traders' positions in national commodities futures markets and over-the-counter markets and to take steps to combat market manipulation that could lead to excessive price volatility.

- phase out in the medium term inefficient fossil fuel subsidies that encourage wasteful consumption. Energy and finance ministers to report back to leaders at the next summit on implementation strategies and timeframes.

- stimulate investment in increasing clean energy, renewables and energy efficiency and provide financial and technical support for such projects in developing countries; take steps to encourage transfers of clean energy technology.

"As leaders of the world's major economies, we are working for a resilient, sustainable and green recovery. We underscore anew our resolve to take strong action to address the threat of dangerous climate change."

"We will intensify our efforts, in cooperation with other parties, to reach agreement in Copenhagen through the UNFCCC, which is the main channel of negotiations."

"Green growth is indispensable to sustainable growth."

- Effective and efficient finance to address climate change must be integrated with developing planning and policies, the darft said. Public and private resources in developing countries must be scaled up urgently and substantially.

- The group asked its respective finance ministers to report back at its next meeting with possible options for climate change financing to be provided as a resource for upcoming UNFCCC negotiations in Copenhagen this December. ------------------------------------------------------

REFORMING THE MISSION, MANDATE AND GOVERNANCE OF OUR DEVELOPMENT BANKS:

The World Bank, working with regional development banks and other international organisations should strengthen:

-- focus on food security through enhancements in agricultural productivity and access to technology and improving access to food.

-- focus on human development and security in the poorest and most challenging environments

-- support for private-sector-led growth and infrastructure to enhance opportunities for the poorest, social and economic inclusion and economic growth

-- contributions to financing the transition to a green economy through investment in sustainable clean energy generation and use, emergy efficiency and climate resilience.

G20 to help ensure sufficient resources are available for these challenges, including through a review of World Bank and regional development banks' general capital increase needs to be completed by the first half of 2010. Additional resources must be joined by key institutional reforms.

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PUTTING QUALITY JOBS AT THE HEART OF OUR RECOVERY

G20 saud it remains commited to implementing recovery plans to employment and promote job growth.

"Without sustained action, unemployment will likely continue rising in many of our countries even after the economies stabilise, with a disproportionate impact on the most vulnerable segments of our population. As growth returns, every country must act to ensure that employment recovers quickly."

Members to focus training of workers on changing market demand, new technologies, clean energy and infrastructure.

- G20 labour ministers to meet in early 2010 to discuss the employment situation and whether further measures are necessary.

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