Boost equity investments to lift growth, G20 urged

LONDON Mon Feb 11, 2013 9:29pm IST

Guillermo Ortiz (R), chairman of Grupo Financiero Banorte, talks to the media during the Mexico Business Summit in Queretaro October 24, 2011. REUTERS/Demian Chavez/Files

Guillermo Ortiz (R), chairman of Grupo Financiero Banorte, talks to the media during the Mexico Business Summit in Queretaro October 24, 2011.

Credit: Reuters/Demian Chavez/Files

Related Topics

Stocks

   

LONDON (Reuters) - The world's financial system must be reconfigured to encourage more investment in shares as part of wider efforts to increase economic growth, an influential think tank said on Monday.

The Group of Thirty (G30), made up of current and former regulators and central bankers, said without such reform it will be hard to raise at least $7 trillion annually it estimated leading economies will need by 2020 to put growth back on track.

The financing is needed for government and private sector infrastructure projects, education, research, housing and business expansion, the G30 said.

"We have to get beyond the short-term issues that are being discussed and look at the long-term and see how growth is going to be revived and how employment is going to be created," former Mexican finance minister and G30 member told a news conference.

"Here's a set of ideas. Our hope is that some of these ideas ... will spark the interest in how to get long-term finance on a strong footing."

The report seeks to put several issues to the Group of 20 (G20) finance ministers meeting in Russia later this week.

It could be pushing on an open door.

The G20 came to the fore during the 2007-09 financial crisis to stitch together a global consensus on regulatory reforms, but its focus has switched to an urgent need to boost growth.

Former European Central Bank President Jean-Claude Trichet said "quick wins" could include rowing back limits faced by pension funds and other investors in shares.

BIAS AGAINST EQUITY

"Everywhere in the world there are biases against equity, in the advanced economies and the developing economies. We are trying to remove these biases," Trichet said.

A wider range of instruments was also needed and the report urges developing countries to push ahead to set up capital markets to issue shares and other finance-raising instruments.

The reforms are needed otherwise growth will remain sluggish due to the ageing population in the west, bank deleveraging and a retreat from equities by pension funds.

UK Financial Services Authority Chairman Adair Turner said another issue being put to the G20 is the need to reduce tax advantages debt enjoys over equity.

The report also takes aim at how holding sovereign debt is favoured, while holding other types of debt, such as bonds linked to infrastructure projects, was less favourably viewed.

The report calls on the G20's regulatory task force, the Financial Stability Board - on which Turner sits - to consider new accounting rule to encourage pension funds to hold shares or other assets for several years. This would avoid having to value the holdings quarterly, which can create volatility.

Another idea would be to link a fund manager's pay to returns over at least three years or more, to encourage a longer-term investment perspective.

(Editing by David Holmes)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Coal Block Allocation

Coal Block Allocation

Government urges Supreme Court to not cancel some 'illegal' coal mines  Full Article 

Modi in Japan

Modi in Japan

Japan and India agree to boost strategic ties at summit  Full Article 

Basel III Norms

Basel III Norms

RBI amends Basel III guidelines for banks  Full Article 

HSBC PMI

HSBC PMI

Factory activity expands at slower clip in August.  Full Article 

Current Account

Current Account

Balance of payments surplus for third straight quarter  Full Article 

India Infrastructure

India Infrastructure

RBI rule handicaps India's infrastructure hopes  Full Article 

Book Talk

Book Talk

Reema Abbasi and a glimpse of Pakistan’s Hindu past  Full Article 

China Economy

China Economy

Retreat in China's PMIs heightens calls for policy easing.  Full Article 

Managing Share Sales

Managing Share Sales

Govt seeks bids from banks to manage PFC, REC share sales   Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage