OECD warns G20 over bank reforms

PARIS: Banks, bonuses, tax havens and under-regulation caused the financial crisis and are the keys to reform. Not so, the OECD warns as the G20 takes steps in such areas.

Compromises on action to deal with symptoms, such as bonuses, rather than action on real causes could even
end up doing more harm than good, the OECD said in a report.

The Organisation for Economic Cooperation and Development says that progress on new rules to strengthen the capital base of finance companies and related regulations does go in the right direction. But, in the words of the author of the report, Adrian Blundell-Wignall, much of the focus in other areas, such as on bonuses, tackles ���symptoms instead of causes��� and ���puts the cart before the horse.���

Instead the focus should be on matters which are scarcely being discussed. Among these issues are:

Preventing the spread of failure, or ���contagion���, by erecting ���firewalls��� within
financial companies

Requiring the company risk manager to be on the main board with freedom to speak out without fear of the chief executive. This would ensure that boards were fully informed, and would focus more on the interests of shareholders rather than on their own incentive pay

Ensuring that directors of financial companies are competent and understand their business, instead of meeting a requirement merely to have no criminal convictions as is the practice now

And reforming national tax regimes in leading countries.