No More Gaps
February 21, 2009
There could no longer be blank spots where regulations don't apply in the wake of the financial meltdown, Merkel said in her weekly video podcast on Saturday, Feb. 21.
"We want to make sure that in the future there are no gaps in the world regarding financial products, market participants or instruments," she said.
The German Finance Ministry also presented Saturday a summary paper, reflecting the main changes to the global financial system that Germany would like to see the Group of 20 (G20) major economic powers make at its summit on April 2 in London.
Germany is set to welcome Sunday leaders Britain, France, Italy, Spain, the Netherlands, Czech Republic and Luxembourg, as well as top European central bankers for a planning meeting ahead of the London summit.
British Prime Minister Gordon Brown wrote to European leaders this week setting out areas where he thought they could take action before the G20 summit.
"The EU should be using its influence to build an international consensus behind the necessary action that the international community has got to take," Brown's spokesman told Reuters news agency. "We need to continue to provide fiscal stimulus to our national economies and ensure those are coordinated."
European agreement
The chancellor, criticized last year for being slow to match British and French national rescue plans, said new unified rules must apply to all financial market products, financial instruments and market participants.
French President Nicolas Sarkozy, accused by some in the European Union giving unfair aid to domestic carmakers, said Europe should unite behind bold measures to fight the ongoing financial crisis.
"I will not associate myself to a position that does not give an ambitious response to this deep crisis," he told reporters on Saturday.
A summary document issued by German Finance Minister Peer Steinbrueck reflects the level of agreement to date between European finance ministers. Highlighting Germany's priorities for the G20 summit, Steinbrueck's notes back up Merkel's message that no financial market, product or stakeholder should remain unregulated.
The document stresses transparency and accountability measures aimed at reining in some of the worst excesses of the financial system before the current bust.
Bonus limits for managers
Steinbrueck's paper calls for, among other measures, an obligation for the originator of any security to retain at least 5 percent of risk -- in response to the complex and unaccountable reselling of mortgages and other debt which caused the financial system to implode in 2008.
The document also calls for registration of hedge funds to be "imposed" and for the external regulation of hedge funds.
Steinbrueck has called for curbs on executive pay, to avoid "excessive risk taking and focus on the short term."
European Commission chief Jose Manuel Barroso has also called for placing limits on bankers' bonuses.
"The payment of excessive bonuses incites financial managers to take ill-considered risks," Barroso told the German daily Hamburger Abendblatt in remarks published Saturday.
Atlas of risk
Merkel said Germany was "very well prepared" for Sunday's meeting. A group of experts chaired by a former chief economist of Germany's central bank, Otmar Issing, had made several suggestions, she added.
These include a map listing the risks faced by financial institutions operating worldwide, reflected in Steinbrueck's preparatory document, in which he calls for the establishment of "effective early warning mechanisms."
Merkel said the G20 was working with "high pressure" on the implementation of a plan of action agreed at the group's last meeting in November.
At the London meeting, Merkel expected the group to take "a significant step forward in implementing these measures."
"On Sunday we will take preparatory measures to appear united and ambitious in London," Merkel said.