MARKETS SURGED yesterday as world leaders agreed a sweeping package of measures to fight the global recession, including a $250 billion (€186 billion) increase in the international money supply.
The global bounce lifted the Iseq by 3.43 per cent or 78.41 points to close at 2,364.18. The financials led the rally with the Iseq financial index adding 18.49 per cent to 614.27.
AIB was the strongest performer, gaining 23.1 per cent to €0.88, while Irish Life Permanent added 18.3 per cent to finish on €1.55 and Bank of Ireland was up 17.2 per cent to €0.68.
In Asia, stocks surged ahead of the summit, with Hong Kong shares recording their biggest daily advance in four months. The rallies continued in Europe and the US, where the SP 500 was up almost 4 per cent by midday.
The summit ended with smiles, a lengthy communique and grandiose pronouncements, although a row between China and France over the blacklisting of tax havens – including possibly Hong Kong and Macao – blazed behind the scenes.
US officials say US president Barack Obama helped broker a compromise over offshore tax savings between Hu Jintao of China and Nicolas Sarkozy of France, who had threatened to walk away from the summit.
Mr Sarkozy had objected to the absence of agreement to publish a list of offshore tax centres that were not in compliance with existing standards on transparency. With the exception of China, all other countries agreed that the Organisation for Economic Co-operation and Development (OECD) would publish a list of offshore offenders in a “naming and shaming” exercise.
In the end they agreed a compromise in which the G20 would only “take note” of the OECD’s list, rather than endorse it.
The summit also agreed that central banks and regulators are to draw up detailed plans for dealing with large international banks that get into trouble.
The move is part of efforts to limit the fallout from future crises.
The Financial Stability Board (FSB), which co-ordinates the actions of regulators around the world, said watchdogs would meet at least once a year to discuss how they would tackle a crisis at a large international bank that could unsettle the global economy.
The plan is part of a series of recommendations set out by the FSB yesterday to shore up the global financial system in the wake of the current crisis. The FSB also promised to overhaul banks’ bonus structures to link pay to long-term performance, but stopped short of endorsing explicit limits on pay.
The FSB also said it would revamp capital rules to ensure that banks build up greater reserves during an economic upswing.
The recommendations reflect a broad consensus among financial regulators about the reforms needed to strengthen the system and limit the impact on the economy of banking crises.
Many of the FSB’s recommendations have been endorsed by national regulators such as Lord Turner, chairman of the UK’s financial services authority.
The Basel Committee on Banking Supervision, which sets global banking rules, this week outlined its plans to overhaul banking rules.
The FSB’s statements underscore the importance of rules being introduced globally to minimise the scope for banks to exploit differences between national regulations.
The FSB, which expanded its membership to include developing nations such as Brazil, China and Russia, is trying to co-ordinate a global regulatory response to the crisis. – (Copyright The Financial Times Limited 2009)
