SCORECARD-How is G20 doing on summit=2

REGULATORY OVERHAUL

BANK CAPITAL: The G20 wants more and higher-quality capital as a cushion against future losses, reducing the need for taxpayer bailouts. The final communique from the Pittsburgh summit called for internationally agreed rules to improve quantity and quality of bank capital and discourage excessive leverage by the end of 2010, with implementation by the end of 2012. Work by the Basel Committee and national regulators, with pressure from bank lobbyists to minimize profit erosion, will determine the shape and scope of standards. The G20 said all members, including the United States, are committed to full adoption of the Basel II Capital Framework by 2011.

HEDGE FUNDS: More disclosure and accountability looks likely. A draft EU law under discussion would regulate hedge fund and private equity managers, leaving final say on rules to EU governments and the European Parliament. The Obama administration wants private capital pools to register with regulators.

DERIVATIVES: The G20 called for trading all standardized over-the-counter derivative contracts on exchanges or electronic trading platforms and clearing through central counter-parties by the end of 2012. Non-centrally cleared contracts should be subject to higher capital requirements, the G20 communique said. Central clearing of credit default swaps traded in the EU began at end of July. The United States wants to shift "standardized" OTC derivatives onto exchanges, going beyond what the EU is currently proposing, while requiring more reporting for "customized" derivatives. [ID:nN20519974]

ACCOUNTING: The G20 urged redoubling of efforts toward global accounting standard harmonization, setting a June 2011 goal for convergence. Modifications to fair value rules are seen as critical to resolving the global toxic assets problem. The International Accounting Standards Board is fast tracking revision to scope of fair value rule to get key parts in force by a G20 deadline of end-2009. The U.S. Financial Accounting Standards Board is on a slower track and has a differing approach to which assets should be at fair value.

SECURITIZATION: The EU has adopted a law mandating banks retain 5.0 percent of securitized products they sell, with the United States considering a similar move. The G20 called for more risk retention by securitizers in the Pittsburgh communique.

CREDIT RATING AGENCIES: The G20 wants them registered and supervised by the end of 2009. The EU has adopted a law mandating registration and direct supervision. The U.S. Securities and Exchange Commission and Congress are eyeing changes.

FINANCIAL SUPERVISION: The G20 called for systemically important financial firms to develop 'living wills' by the end of 2010. EU leaders have agreed to set up a European Systemic Risk Board in 2010. A new U.S. framework for monitoring systemic risk is still under debate, with Obama's proposal to give the job to the Federal Reserve facing challenges.

PAY: The Pittsburgh communique called for immediate implementation of new curbs on banker pay to reflect long-term performance and balance sheet health, with measures including banning multi-year guaranteed bonuses; deferring more compensation; limiting bonuses as a percentage of total revenues where capital is inadequate; and requiring more compensation committee independence. The U.S. Federal Reserve plans new bank pay curbs. The U.S. House of Representatives has approved executive pay legislation that the Obama administration supports, but the Senate has not begun considering it. The Financial Stability Board is to monitor implementation and propose additional measures by March 2010.

TAX HAVENS: The G20 said its members stand ready to use counter-measures from March 2010 against jurisdictions that fail to comply with international expectations on taxation, money laundering, proceeds of corruption and terrorist financing. The Pittsburgh communique called on the FSB to report progress on compliance by November 2009 and initiate a peer review process by February 2010, with the Financial Action Task Force to issue a public list of high risk jurisdictions by February 2010.