Darling tells G20 to get tough on bankers

Britain called yesterday for tighter financial market regulation, setting out its agenda for April's G20 summit in London when world leaders will meet to tackle the worst financial crisis in living memory.

The meeting will be one of the first major international events attended by US President-elect Barack Obama as pressure grows on governments and central banks to stave off a global economic slump.

With an election in Britain due by May 2010, British Prime Minister Gordon Brown will also be hoping the summit will further boost his popularity following plaudits over his handling of the crisis so far.

"We need tougher global financial regulation," finance minister Alistair Darling said in a letter to G20 colleagues, the International Monetary Fund and the World Bank.

"The ability of the financial system to perform its critical role in the economy - allocating capital, managing risk and facilitating transactions - has been badly undermined... Our first objective should be therefore to return trust and confidence to financial markets."

The April 2 summit will bring together leaders from the world's main developed and developing economies as a follow-up to November's financial crisis summit in Washington.

Finance ministers and central bankers from the Group of Seven wealthy nations will meet in Rome on February 14 under the Italian presidency of the smaller core group. Finance ministers from the broader G20 will meet in Britain a month later to prepare for the summit. The global outlook has deteriorated markedly since the G20 leaders last met in November, despite stimulus packages and big interest rate cuts in the world's bigger economies.

Policymakers have agreed joint fiscal and monetary action is needed now to pull major economies out of recession but acknowledge that tougher regulation will be needed to prevent future crises.

However, agreement on rewriting the rules of international finance is likely to prove difficult, because continental European demands for stronger measures are likely to run into US resistance.

"There must be a step change in the way regulators work and, in particular, the way that national regulators cooperate," Mr Darling said.

"We must recognise that we neither could nor should operate in a zero failure regime. This is sensible recognition that regulation will never prevent all failures."