James Plaskitt MP: G20 must act on banking

Labour MP James Plaskitt writes for ePolitix.com on the issues raised in his Westminster Hall debate on the G20 summit.


Ahead of the G20 meeting in London on April 2, the government has published a document entitled 'The road to the London summit – the plan for recovery'. While preparation for the summit is under way, I am taking the opportunity presented by this debate to find out a bit more from ministers about the government's expectations for the meeting.

The agenda is vast, encompassing financial market stability, the restoration of the global financial system and establishing a route back to global economic growth.

If all three are securely delivered by this one G20 meeting then it will be the most remarkable summit in history! In reality, the meeting will, hopefully, establish a range of broad principles, and much of the detailed work and negotiation will have to follow.

My major area of concern is the redesigning of global banking supervision.

The current crisis has revealed the deep inadequacy of the loose regulatory system based on the Basel accords. These have been completely unable to cope with the globalised banking system which has emerged from the deregulatory policies of the 1980s.

There really has been no effective global supervision and no universally applied regulatory principles.

Instead we have had the dangerous imbalance of a global banking structure regulated by a host of national regulatory systems.

That has resulted in the creativity of off-balance sheet activities, the creation of vastly complex securitisation vehicles and the indiscriminate mixing of commercial and investment banking.

Inadequate global regulation allowed these developments to go on broadly unchecked. National regulators simply could not keep pace with market innovation.

The result is the crisis we are now in.

But a crisis is a terrible thing to waste. So now is the time to establish the sort of global co-ordination that is essential to deal with cross-border institutions deemed too big to fail.

The G20 cannot afford to fail either.