At the weekend, the G20 economic Ministers, amongst their discussions, worked on an agreement aimed at protecting global Banking from systemic risks and reforming Bankers’ bonus payments. The contentious areas are likely to be the requirement to hold more and higher quality capital and the setting of leverage ratio, limiting the amount of borrowing by institutions outside the formal Banking regime. One requires more capital equity; the other alters the way Banks borrow in the capital markets. It seems that France and Germany want to curb bonuses whilst Britain and USA think that another way is needed. Some have said that the wording of the communiqué on capital requirements seemed open to interpretation; with it saying that standards on capital are intended to take effect ‘ once recovery is assured ’.
There should be much gritty detail preparation for the Summit at the end of the month in the home of the Big Mac, Pittsburgh. The ministers might, over their lunch, discuss the Big Mac Index, to further fuel the fire. Run by The Economist, it’s an indicator of the world’s major currencies and used to illustrate shifts in purchasing power of different currencies, for example the UK, based on the price paid for a Big Mac in USA being different when converted to pounds for purchase in the UK. At least it’s something different to bring to the table.