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rEBUILDING MOMENtUM tO rEFOrM thE FINANCIAL SYStEM

19 The financial crisis provides clear evidence of the failure of the light regu- latory approach of the past and the over-reliance on self-regulation. It is also testimony to the unsustainability of a narrow focus on short-term gains.

20 G20 leaders must press ahead with the re-regulation of the banks and the financial markets. The financial sector has become too large and too unstable. G20 governments need to take steps to ensure that is restored to its legitimate and subservient role of providing credit for the real economy. Governments must use their position as primary investors in the banks to push forward a programme of strong reform. Whilst the commitments made at the London Summit represent some progress, implementation is slow on a number of key issues including regulation of private pools of capital, derivatives and securitised products. The Financial Stability Board (FSB), which was assigned the task of coordinating the G20 process of financial reform process, remains veiled in secrecy.

21 Moreover, the scandal of bankers and traders’ multi-billion bonuses that erupted across OECD countries during the summer 2009 illustrates the need for urgent action that goes well beyond the commitments made in London (see BOX 1). This indefensible remuneration has fuelled anger among working families, coinciding as it does with the expansion of precarious forms of work in many countries. The bonus scandals are testi- mony to the failure of an approach to corporate governance that is centred on shareholder value.

BOX 1: WALL StrEEt BONUSES 2008: WhAt thEY COULD pAY FOr

according to the attorney general of the state of new York, andrew Cuomo6, the nine largest Us banks which collectively received UsD 175Bn in government support as part of the Troubled asset Relief Program (TaRP) granted UsD 32.6bn in bonuses to their employees in 2008. This sum would have paid for:

Financing the gap to achieve universal primary education, adult literacy and childhood care and education in the 68 low-income countries for three years7;

More than doubling the Us 2008 level of ODa, bringing it in line with OeCD average; i.e., 0.41% of gross national income, compared with 0.18% currently8;

Cancelling the remaining debt of all heavily indebted Poor Countries (hiPC)9.

22 A key lesson arising from the crisis, and from the resulting bank bailout, i s t h e n e e d f o r e f f e c t i v e , t r a n s p a r e n t a n d p u b l i c l y a c c o u n t a b l e s u p e r v i s o r y

authorities with strong regulatory and enforcement powers over banks

6 7

< http://www.oag.state.ny.us/media_center/2009/july/july30a_09.html>. <http://www.unesco.org/education/gmr2009/press/efagmr2009_Highlights.pdf>.

8 9

<http://www.oecd.org/dataoecd/48/34/42459170.pdf>. <http://siteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1240603491481/

D e b t _ P o c k e t B r o c h _ S p r i n g 0 9 . p d f > .

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