Financial reform could now rest with Obama (News Feature)

Washington - Winding up the Washington summit on Saturday of the leaders of the world's top economies, US President George W Bush stressed the speed with which the meeting had been pieced together. The Group of 20 (G20) government chiefs attending the summit called for a series of rapid moves to face up to the fallout from the financial crisis that has recently engulfed global markets. But much of the complicated work of overhauling the global financial regulatory system has been handed to finance ministers who have until the end of March to report. 'A meeting is not going to solve the world's problems,' Bush told reporters. In reality, a meeting that he called to help demonstrate his statesmanship in the dying days of his administration has in effect passed over to president-elect Barack Obama's White House efforts to steer the international community to a new financial world order. Obama launched a scorching attack on regulation of Wall Street after the financial crisis took centre stage in the final months of the presidential election campaign following the collapse of the giant US banking group Lehman Brothers, which sent global markets into a tailspin. More to the point, the market turmoil and the deepening economic gloom in the US were key factors in helping to propel Obama towards the White House. But the president-elect, who did not attend Saturday's meeting, has still not set out in detail how he believes financial markets should be regulated in the future. In their declaration following the Washington meeting, the G20 leaders, which include government chiefs from both the world's leading industrial nations as well as major emerging economies, agreed to hold another summit at the end of April. It would review the progress of the steps taken to try to avert financial crises like the one that recently hit global markets and pushed the world economy into sharp decline. In their five-page communique, the leaders pledged to take specific steps during the next three months to boost and modernize bank supervision as well as ensuring that credit-rating agencies meet 'the highest of standards and avoid conflicts of interests.' At the same time, the leaders called on governments around the world to step up public spending in a bid to spur growth in the face of fears that the key economies could sink into recession next year. The leaders have also decided to buy into the thorny subject of executive pay by proposing to review how top business leaders' pay scales may exacerbate cyclical trends. This mirrors the moves already underway in several nations where big bonus payments have become a target of criticism especially in the wake of the collapse of leading banking groups. Other measures envisaged by the leaders attending the summit could also take long to thrash out and to establish. One of the more difficult questions is how to rebalance the power structures of the world's top financial institutions such as the International Monetary Fund, the World Bank and the Swiss-based Financial Stability Forum to reflect the growing economic clout of the leading emerging economies. The summit has also called for the creation of new financial market watchdogs, a so-called 'college of supervisors' to monitor all major cross-border financial institutions and the exchange of information. Senior US officials stressed that many of the measures set out in the summit communique and the accompanying action plan formed the basis of any moves to bring financial market regulation into line with the changes unleashed by fast-paced globalization. Indeed, in his closing remarks, Bush singled out a proposal to create a central clearing house to enable supervisory authorities to keep check on the risk of investment tools such as credit-default swaps. Many believe the 60-trillion-dollar credit-default swaps market played a key role in the recent crisis. Equally, it will take some time for other measures set out in the declaration, such as strengthening global financial transparency, accountability and disclosure measures, to ultimately change financial market culture.