Morning:
13°c
THERE are, it must be admitted, limits to the ability of the world leaders gathered in the unprepossessing environment of the ExCel centre to find a recipe to combat recession between breakfast and the final communique at tea-time. But it already seems clear that there is a broad consensus about the outlines, at least, of an agreement. And the grandstanding by France and Germany yesterday means that there is corresponding scope for the Prime Minister to claim the final, agreed communique as a diplomatic and personal triumph.
But alongside the grand statements about doing whatever needs to be done wherever it needs to be done, there does need to be some grit in the deal. In particular, a stricter system of financial regulation by which the French and German governments set store, is necessary and unavoidable. The talk about a collision between a supposedly lax American approach to regulation and a strongly supervised European one is simply out of date. The US is now engaged in strengthening its own regulation of financial institutions. There may be disagreement between China and France about the control of tax havens but on the necessity of rules to prevent a replay of the credit crunch, no one differs.
As the finance ministers of the G20 pointed out in their preparatory meeting, one of the chief problems is how to deal with banks' toxic assets. Beyond that is the broader question of what regulation - whether national, European or global - seeks to achieve.
And the answer has to be very simple. Banks need more assets to back their lending; they need larger capital reserves to give them stability. Lord Turner's prescription for British banks in his recent report was that banks should be obliged to put aside money in the good times in order to tide them over the bad. There was a time when banks would not have needed to have this elementary prudential principle pointed out to them. Plainly they do now. Crackdowns on bonuses that reward risk-taking are part of that endeavour but only a small part.
There is consensus about the desirability of an international aspect to the regulatory regime but fundamental control of the banking system must happen on a national basis. Adding ever greater layers of bureaucracy carries the danger of buck-passing. If history has a lesson, it is that we rarely learn the lessons of history. The job of the G20 leaders is to ensure that, a decade on, we do not find ourselves in this sorry situation again.
Nuclear fusion
THE beauty of international summits, despite their vast expense and bureaucracy, is that they give world leaders the chance actually to engage with each other - man to man, in the case of the US president, Barack Obama and the Russian premier, Dmitry Medvedev. The object of the G20 summit was not nuclear disarmament but the result of the meeting yesterday between the two leaders has been a pledge to reduce their nuclear arsenal to perhaps no more than 1,500 warheads each.
An economic recession is, in fact, a good time to reassess the desirability of spending much-needed funds on nuclear weapons. For that reason, the Prime Minister would be well advised to think again about Trident. Time will tell whether this hopeful initiative between the US and Russia will bear fruit in other ways but if it results in at least a 30 per cent reduction in the nuclear stockpile of the two countries, this summit will have done real good.
Operatic horrors
THE young director Rupert Goold is nothing if not versatile. Hard after his triumphs with Macbeth and Oliver! he heads to the ENO to produce Puccini's Turandot because he has an interest in "high-end horror". Opera being particularly rich in this respect, we can hope that there will be many more sensational productions to come
Reader views (1)
I don't believe more regulation is the answer. Better use of the current regulations will be more practical.
I have real concerns that if the UK enacts tougher financial regulation it will drive away much of the financial business that brings prosperity to London...
And no way do I believe that other countries (even those in the G20 mtg) would not exploit this situation and pilfer what they can of the UK's financial industry.
Reporting in the media is confusing, many media commentators seem confused between hedge funds and banks, securitisation and trading, on balance sheet and off balance sheet, fund raising and lending, traditional and investment banking,....differences that are important, and businesses that all have an important place in London's economy.
Whilst I understand the anger directed at the financial industry, we also have to acknowledge the part played by the many irresponsible borrowers/consumers funding ever more extravagant lifestyles using cheap credit that is easy to borrow but not so easy to repay.
- Rikrok, London
