G-20 Nearing Pact on Tightening Market Rules as Meeting Starts

By Tony Czuczka and Edwin Chen

April 2 (Bloomberg) -- World leaders neared an agreement to tighten rules on financial markets, crack down on tax havens and channel more cash to the International Monetary Fund as they narrowed differences over how to fight the deepest global recession since World War II.

“You’ll see a substantive and ambitious outcome, serious moves and steps put in place to accelerate our recovery from this recession,” U.K. Business Secretary Peter Mandelson said today in a Bloomberg Television interview.

Leaders of the Group of 20 nations gathered today in London a day after German Chancellor Angela Merkel and French President Nicolas Sarkozy sparred with President Barack Obama and British Prime Minister Gordon Brown over how to avoid repeating the financial market collapse that caused the recession.

At the top of the agenda is a regulatory framework to rein in risky trading practices and executive pay. The leaders also moved toward compromise on naming tax havens and how far to go in overseeing hedge funds.

“I don’t think President Sarkozy will be disappointed,” said Mandelson. Brown will announce the summit’s conclusions today at 3:30 p.m.

The summit marks a “unique chance” to “thoroughly” change the financial system, Merkel, who faces elections in September, said at a news conference in London yesterday. “That’s why we’re being a bit tough.”

Officials signalled they will endorse $500 billion in new cash for the IMF, bringing its resources to $750 billion. They also moved closer to Brown’s goal of providing $100 billion in credit lines to support trade after Japan pledged $22 billion.

“I am very confident that we will significantly increase the IMF resources,” U.K. Chancellor Alistair Darling said in a Bloomberg Television interview. “People have talked about doubling and perhaps we can go further than that. We want to make sure the IMF has as much money as it need and critically that it can intervene earlier.”

Geithner’s Effort

U.S. Treasury Secretary Timothy Geithner wants to bring hedge funds, private-equity firms and derivatives markets under federal supervision for the first time. A new systemic-risk regulator would have power to force companies to increase their capital or cut their borrowing, and authorities would be able to seize them if they came unstuck.

“There is a very strong consensus for broader, stronger, higher standards so the world never faces a crisis like this again,” Geithner said in a Bloomberg Television interview yesterday. “The approach that all these countries are going to come together and support is that we agree on higher common standards for oversight.”

Protests continued today after demonstrations yesterday in London’s financial district. Activists clashed with police outside the Bank of England and broke into a Royal Bank of Scotland Group Plc branch. Police in riot gear, on horseback and with dogs moved in to surround members of the crowd that smashed at RBS, which is now mostly-owned by the U.K. government.

Sarkozy said yesterday the summit draft doesn’t do enough to attack tax cheats and there must also be a “global decision” to crack down on traders’ bonuses. Another concern of the euro-area’s biggest countries was that not enough hedge funds will be subjected to oversight.

The recession has worsened since the G-20 leaders last met in November in Washington.

Slump Forecast

The Organization for Economic Cooperation and Development said in Paris that the economy of its 30 members will contract 4.3 percent this year and predicted unemployment in the Group of Seven will reach 36 million late next year. The World Bank lowered its growth forecast for developing countries this year by more than half to 2.1 percent.

“The only thing I wish for is that all the presidents gathered here have the maturity to understand the every day that passes without a solution to the crisis, more people are going to suffer,” Brazilian President Luiz Inacio Lula da Silva told reporters after arriving in London.

G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union. Officials from Spain and the Netherlands are also present.

To contact the reporters on this story: Edwin Chen in London at echen32@bloomberg.net; Tony Czuczka in London at aczuczka@bloomberg.net