Finance news. My opinion.

General Electric Co and Vivendi SA have agreed in principle to value the French company’s 20 percent stake in NBC Universal at $5.8 billion, a source familiar with the matter said on Monday, paving the way for Comcast’s proposed deal with GE.

GE and Vivendi have spent weeks negotiating over the value of Vivendi’s stake in NBC Universal, holding up Comcast’s plan to buy a controlling stake in NBC Universal. Vivendi has to agree to sell its stake to GE to make the Comcast deal possible.

With the two sides reaching an agreement on valuation, an announcement on the Comcast-GE deal could come as early as the end of this week, a second source said.

(Reporting by Jui Chakravorty and Anupreeta Das; Editing by Richard Chang)

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Europe’s biggest bank HSBC Holdings said its underlying third quarter profits were “significantly ahead” of a year ago and said losses on U.S. consumer loans had shown their first fall in three years.

HSBC said loan impairment allowances for its U.S. consumer finance business declined in the third quarter, representing the first quarterly fall since the start of 2006 and their lowest level for over a year.

HSBC said its investment bank arm had maintained its record performance so far this year.

HSBC shares were up 1.8 percent at 704.9 pence at 0830 GMT (3:30 a bad credit payday advance.m. EST).

“I believe the biggest jolt has now passed through the global economy,” said HSBC Chief Executive Michael Geoghegan. “The world will likely see a two-speed recovery,” he said, adding that emerging markets are likely to drive the recovery.

The bank said on a reported basis, including losses on the fair value of its own debt, Q3 profits were lower than a year ago.

(Reporting by Steve Slater and Clara Ferreira-Marques)

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U.S. banks are at risk of sizable new loan losses, particularly on commercial property, and some banks may not have sufficient capital to fully cushion against losses, a Federal Reserve official said on Monday.

Some large regional and community banks that have built up unusually high concentrations in commercial real estate loans will be "particularly affected" by conditions in those markets, said Jon Greenlee, associate director of the Fed’s Division of Banking Supervision and Regulation.

In the second quarter, said Greenlee, "Credit losses at banking organizations continued to rise, and banks face risks of sizable additional credit losses given the outlook for production and employment."

Greenlee’s comments were in testimony prepared for delivery to a House of Representatives Oversight and Government Reform subcommittee.

"Poor loan quality, subpar earnings, and uncertainty about future conditions raise questions about capital adequacy for some institutions," he said.

While the stability of the banking system has improved, it is far from robust as banks face pressures from weakness in both residential and commercial property markets, Greenlee said.

Although year-on-year housing price price declines slowed in the second quarter, foreclosures and mortgage loss severities are likely to remain high, he said.

Delinquencies of mortgages backing commercial mortgage-backed securities have increased markedly in recent months and market participants anticipate the delinquency rates will rise by the end of the year, Greenlee said.

Fed examiners are noticing a sharp deterioration in loans in banks’ portfolios and loans in commercial mortgage-backed securities, he said. 

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The Association of Southeast Asian Nations said it is “on track” to achieve its goal of eliminating tariffs on most goods traded within the region by the beginning of 2010.

The group aims to form a free-trade area by Jan. 1 that would remove tariffs on more than 87 percent of imports, according to a statement by Southeast Asian leaders, who are meeting in Cha-Am, Thailand this weekend. Six of the bloc’s 10 members will implement the tariff eliminations, while the rest, which are less developed, will follow later.

Asean is attempting to create an economic zone modeled after the European Union, without a common currency, by 2015. The group has said it needs to improve its competitiveness as China and India, the world’s two fastest-growing major economies, attract an increasing chunk of global investment.

“The effective implementation of this major milestone in the free-trade area brings Asean closer to the Asean Economic Community where free flow of goods is one of its major objectives,” the statement said.

The Southeast Asian nations are also planning to open industries including transportation and financial services. Meanwhile the group’s plan to implement a free-trade agreement in goods may be delayed amid disputes among some nations.

Thailand and the Philippines are arguing over tariffs on rice imports. Thailand has threatened not to approve the Asean Trade in Goods Agreement if the Philippines doesn’t lower import tariffs on rice, the Bangkok Post reported Oct. 20, citing Nuntawan Sakuntanaga, head of the Trade Negotiations Department.

“We urge member states to resolve the differences at the earliest opportunity,” the leaders said today.

As well as Thailand and the Philippines, Asean’s members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore and Vietnam.

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Bank of England policy makers maintained consensus on the size of their bond-purchase plan this month, postponing a debate on the need for more spending until officials produce economic forecasts in November.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, unanimously voted to keep the program at 175 billion pounds ($286 billion) and to leave the benchmark interest rate at a record low of 0.5 percent.

“There were differences of view among members of the committee on the balance of risks to the medium-term outlook for inflation and how it had shifted in recent months,” the minutes of the Oct. 8 meeting showed today in London. “All committee members, however, agreed that recent developments were not sufficiently compelling to justify revising the target level of asset purchases.”

King and David Miles had pushed for more spending in August, when forecasts showed that the inflation rate may not return to the 2 percent target in two years. King said yesterday that the outlook for consumer prices is volatile and that policy makers would look beyond the short term to determine how much spending the economy needs.

The pound extended gains against the euro and the dollar after the minutes were published. Britain’s currency rose 1.2 percent to 90.16 pence per euro as of 10:10 a.m. in London, and 1.3 percent to $1.6577.

November Forecasts

“The forecast round ahead of the November inflation report would provide an opportunity to assess more fully how the medium-term outlook for activity and inflation had evolved since August,” the minutes said payday loans with no fax.

The central bank should pause its bond-purchase program next month after Britain probably emerged from recession, the National Institute for Economic and Social Research said today. Gross domestic product will probably increase 0.7 percent in the last three months of the year, Niesr said.

While the U.K. economy may have returned to growth in the third quarter, policy makers have signaled that the recovery may be uneven. The statistics office will probably say Oct. 23 that the economy grew 0.2 percent in the July-September period, according to the median of 33 economists forecasts in a Bloomberg News survey.

Policy makers said that higher asset prices, lower short- term interest rates and the weakness of the pound would help economic growth in the future. London home sellers raised asking prices to a record high this month and led gains across the U.K., Rightmove Plc said Oct. 19.

The bond purchases had probably helped contribute to improvements including a narrowing of spreads, the minutes said.

“The evidence suggested that the effect on asset prices had been of the type that the committee had anticipated when it launched the program and had been substantial,” the minutes said. “The impact of the recent rises in asset prices would be to support spending, but only if sustained.”

The next policy decision is due on Nov. 5.

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U.S. consumers plan to spend 3.2 percent less this holiday season from a year ago as they shop for deals at discounters and buy fewer gifts for non-family members, according to a survey.

Shoppers plan to spend an average $682.74, compared with $705.01 last year, according to the National Retail Federation, a Washington-based trade group. Last year’s decline was 7.6 percent, compared with the 9 percent increase shoppers had projected going into that shopping season.

This will be the holiday season of “the serious bargain- hunter,” the trade group said in a statement today. The NRF reiterated its own prediction for a 1 percent decline in holiday sales, a forecast that is based on unemployment rates and retail sales.

Forty-three percent of respondents said discounts will be the most important factor in deciding where to shop, compared with 40 percent a year earlier. Seventy percent said they would shop at discounters, similar to the previous year.

Spending on family members will drop 2 percent, while for friends and co-workers, it will decline 17 percent and 15 percent, respectively, according to the survey.

U.S. holiday sales may decrease for the second year as consumers stick to budgets and retailers cut prices to encourage spending, the NRF said earlier this month.

Sales for the last two months of the year will probably fall 1 percent to $437.6 billion from the same period in 2008, the NRF forecast Oct. 6. That’s not as steep as last year’s decline of 3.4 percent, the first drop since the NRF started tracking holiday sales in 1995. The highest U.S. unemployment in 26 years, stagnant wage growth and wavering consumer confidence will reduce spending, the NRF said.

Today’s findings are based on a national survey of 8,431 adults contacted from Sept. 30 to Oct. 7. The survey has a margin of error of plus or minus 1 percent. It was conducted for the NRF by Worthington, Ohio-based BIGresearch LLC.

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The U.S. view that China is keeping its currency undervalued in order to boost exports will foster a “more contentious” relationship between the two nations, said Stephen Roach, chairman of Morgan Stanley Asia in Hong Kong.

The convergence of mounting U.S. unemployment and next year’s Congressional elections will make it easy for both Republicans and Democrats to criticize China, Roach said in a Bloomberg Television interview aired today in New York.

“It will get more contentious as we move into 2010,” he said. “There’ll be a lot of cries on both sides of the aisle to do something about the plight of the American worker. China is, unfortunately, the whipping boy in many of these discussions.”

The U.S. Treasury Department yesterday criticized China in a semiannual report to Congress, saying “the recent lack of flexibility of the renminbi exchange rate and China’s renewed accumulation of foreign-exchange reserves risk unwinding some of the progress made in reducing imbalances.” The Treasury stopped short of branding China a manipulator of its yuan, also known as the renminbi.

Roach, author of the newly released book “The Next Asia: Opportunities and Challenges for a New Globalization,” said the U.S. must think “long and hard” about its relationship with China, which has financed America’s appetite for consumer goods by buying Treasury securities.

Less Influence

China may “move outside the sphere of influence of the U.S.” as its domestic demand rises and exports become a smaller contributor to growth, he said. “The time will come when they are less reliant on us,” Roach said. “We still need an international lender of last resort. Who’s going to help us out, it’s a fair question.”

China needs to boost investment in social security, private pensions, and insurance for unemployment and medical care, Roach said, to prompt its consumers to save less and buy more goods from overseas.

“Until they can address that key issue, the development of a broad-based consumer culture is still too far out in time,” Roach said.

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Confidence in the world economy rose for a third straight month in October as gains in manufacturing and equities added to signs of recovery, a Bloomberg survey of users on six continents showed.

The Bloomberg Professional Global Confidence Index increased to a record 61.7 from 58.54 in September. The index exceeded 50 for a third month, which means there were more optimists than pessimists.

“Conditions have reached a point of stability worldwide,” said Guy LeBas, chief economist and fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, who participated in the survey. “We’re seeing growth even in parts of the world that were looking dull earlier. The eurozone is coming out of the recession fairly quickly and in decent shape and the U.S. is improving.”

The global equity rally has added about $20 trillion to the value of stocks since this year’s low on March 9 as evidence mounts that the world economy is emerging from its deepest recession since the 1930s. The pace of the recovery may be tempered as stimulus measures undertaken by policy makers fade out and unemployment threatens to continue rising.

“Asset markets are rising and that’s having positive wealth effects and helping confidence come back a bit stronger,” said Robert Subbaraman, chief economist for Asia excluding Japan at Nomura International Ltd. in Hong Kong. “There are still problems with the world economy as a lot of the support is being fueled by loose policies which cannot be sustained.”

China Exports, Intel

Stocks rose today. The MSCI World Index climbed 0.9 percent to a one-year high as the decline in China’s exports slowed and Intel Corp.’s sales forecast topped analyst estimates. JPMorgan Chase & Co., the second-largest U.S. bank by assets, said profit in the third quarter soared almost sevenfold as fixed-income revenue surged.

Confidence may abate in the event that stocks erase part of their advance. The MSCI World Index has surged 67 percent since March 9, driving valuations on the gauge of 23 developed countries as high as 27.9 times annual earnings, data compiled by Bloomberg show. The Standard & Poor’s 500 Index is priced at 20.3 times profit, the highest level since 2004.

The survey of more than 1,400 Bloomberg users was conducted between Oct. 5 and Oct. 9. Since the previous survey, Group of 20 leaders vowed to keep stimulus measures until growth takes hold, the International Monetary Fund boosted its forecast for the global economy this year and next, and the Reserve Bank of Australia raised interest rates.

‘Gathering Steam’

Europe’s manufacturing and services industries expanded more than initially estimated last month, while some U.S. gauges of production are showing an acceleration in activity. India’s industrial production rose the most in 22 months in August, while China’s output gains were the fastest in almost a year.

“Investors think the recovery is gathering steam,” said Christopher Low, chief economist at FTN Financial in New York and a participant in the survey. “Manufacturing has shown the most improvement, and global trade is picking up.”

The world economy will contract 1.1 percent this year, and expand 3.1 percent in 2010, the Washington-based IMF said earlier this month.

Policy makers are debating the timing of the withdrawal of monetary and fiscal policies that have helped avert another Great Depression. Federal Reserve Chairman Ben S. Bernanke on Oct. 8 said the U.S. central bank is prepared to tighten monetary policy when the outlook for the economy “has improved sufficiently.”

Exit Strategies

New Zealand’s central bank is removing some of the liquidity facilities it put in place last year, while the Bank of Japan left its benchmark rate near zero today and refrained from saying if it would end its corporate debt purchase programs.

“The dynamic of the global recovery is very intense,” said Jose Carlos Diez, chief economist at Intermoney SA in Madrid. “If the central banks get nervous and put the brakes on too fast, that could abort the recovery.”

Bloomberg users in Spain are the most pessimistic on their economy as the nation remains mired in a recession even after France and Germany returned to growth. Spain’s index fell to a four-month low of 10 from 14.5 in September. The confidence gauge for western Europe rose to 44 from 43.2 last month.

Dollar Weakness

Confidence jumped the most in the Latin American region this month, with its index advancing to 72.9 from 65.5 in September. Brazil, the region’s biggest economy, is unwinding stimulus measures amid a resumption of growth as the central bank tightened rules for lenders to meet reserve requirements.

Sentiment fell in Japan, where a strengthening yen against the dollar is eating into company profits just as global demand stabilizes. The gauge for Japan declined to 38.8 from 48.8, while that for Asia rose to 76.2 from 73.6.

“In Asia, the biggest threat is the weakness in the dollar, because those economies are so dependent on exports to the U.S.,” Low of FTN Financial said.

The U.S. dollar may weaken further in the next six months against the world’s most actively traded currencies, as the survey showed sentiment near an 18-month low. The trade-weighted Dollar Index has fallen 7 percent this year, and gold, which usually moves inversely to the U.S. currency, is at a record. The dollar confidence index was 31.2 from 30.8 in September.

Users in Japan are less optimistic about the yen’s appreciation against the dollar, with the index falling to 56.9 from 62.1. Respondents in western Europe are still betting the euro will strengthen against its U.S. counterpart.

Stocks Sentiment Mixed

Bloomberg users were mixed on the outlook for their equity markets in the next six months. Respondents in the U.S., Japan and Spain expect shares to decline, while those in Brazil, Mexico and Italy predict their markets will extend their advances.

New York University Professor Nouriel Roubini, who predicted the financial crisis, on Oct. 3 said stock and commodity markets have gone up “too much, too soon, too fast” and may drop in the coming months as the gradual pace of the recovery disappoints investors.

Survey participants in the U.S., Europe and Latin America are also more confident short-term interest rates will rise in the next six months, the survey showed.

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The U.K. economy shrank less than previously estimated in the second quarter and mortgage approvals stayed near the highest in more than a year last month, a sign Britain is emerging from recession.

Gross domestic product fell 0.6 percent from the first quarter, compared with a prior measurement of a 0.7 percent drop, the Office for National Statistics said today in London. Banks granted 52,317 loans to buy homes in August, close to the highest level since April 2008, a separate report by the Bank of England showed.

Britain’s worst recession in a generation is easing after five consecutive quarters of contraction. Chancellor of the Exchequer Alistair Darling said yesterday that the recovery may be under way by the end of the year, supported by the government’s stimulus measures and Bank of England asset purchases.

“We should be looking forward to a decent positive number in the third quarter and an even better one in the fourth quarter,” said Alan Clarke, an economist at BNP Paribas SA in London in a Bloomberg Television interview. “But my view is: enjoy it while it lasts. We could see a soft patch in 2010.”

GDP slumped 2.5 percent in the first quarter, the most since 1958 and revised down from a 2.4 percent decline. The recession has now shaved 5.6 percent off gross domestic product. From a year earlier, the economy contracted 5.5 percent, the most since records began in 1956, the statistics office said.

Brown’s Promise

Prime Minister Gordon Brown promised last week to maintain stimulus spending until the recovery is secure. The Treasury plans to sell an extra 220 billion pounds ($349 billion) in debt this year and next year expects a deficit of 12 percent of GDP.

Brown’s ruling Labour Party fell to third place for the first time since 1982 in an opinion poll published today. Both Conservatives and Liberal Democrats led Labour in the Ipsos-Mori Ltd. survey finished Sept. 27.

“Many independent forecasters now believe the U.K. too is coming out of recession. I think it is too early to say so with total confidence,” Darling told the Labour Party annual conference in Brighton, England yesterday. “As long as we continue to support the economy, recovery will be under way in the U.K. by the turn of the year.”

A report by Hometrack Ltd. showed yesterday that U.K. house prices increased the most in two years in September as confidence in the property market improved. Services expanded at the fastest pace in almost two years in August.

GDP Breakdown

In the second quarter, manufacturing fell 0.1 percent, half the amount previously estimated, while construction declined 0.8 percent instead of 2.2 percent, the statistics office said. Services dropped 0.6 percent, unchanged from the prior assessment.

Wolseley Plc, the world’s largest supplier of heating and plumbing gear, said yesterday a decline in profits will slow next year while fund raising from investors along with cuts in working capital helped it pare debt. The Reading, England-based company has shed a total of 30,000 jobs as the recession hammered profit.

Bank of England Chief Economist Spencer Dale said last week that while the economy has “turned a corner,” the U.K. faces a “slow and protracted” climb out of the recession as unemployment continues to rise. The number of people seeking jobs rose in the three months through July to 2.47 million, the highest level since 1995.

Growth ‘Uncertainty’

“The fiscal stimulus is likely to subside from the middle of next year and it leaves a lot of uncertainty about the sustainability of growth momentum,” said Lena Komileva, an economist at Tullett Prebon in London. “The Bank of England may look to counterbalance the draconian tightening that’s in store from the next parliament.”

The household savings ratio, which measures the proportion of post-tax income saved, increased to 5.6 percent in the second quarter, the most since 2003, the statistics office said. Household disposable incomes adjusted for inflation rose 0.9 percent in the second quarter and were 0.7 percent higher than a year earlier.

Consumer spending, which accounts for two thirds of the economy, fell 0.6 percent in the quarter, revised up from a 0.7 percent drop, the report showed.

Gross domestic product will rise 0.3 percent in the third quarter and 0.4 percent in the last three months of the year, the Confederation of British Industry, the nation’s biggest business lobby, said last week. The central bank will start raising the benchmark interest rate from the current record low of 0.5 percent in the first half of 2010, the CBI says.

BOE Decision

Policy makers unanimously decided this month to maintain their plan to buy bonds with newly created money at 175 billion pounds, minutes of the Sept. 10 decision showed last week.

The current account gap widened to 11.4 billion pounds in the second quarter from 4.1 billion pounds in the previous three months, the statistics office said in a separate report today. That’s the most since 2007 and amounts to 3.3 percent of GDP.

“The stimulus is going to start to disappear and there’s going to be a severe and sustained fiscal squeeze that will keep growth relatively sluggish,” said Jonathan Loynes, an economist at Capital Economics Ltd. in London.

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Global leaders meet this week seeking to deliver the broadest financial regulation overhaul since the 1930s, potentially threatening profits and stock prices of banks from Goldman Sachs Group Inc. to Barclays Plc.

President Barack Obama and his Group of 20 counterparts convene in Pittsburgh on Sept. 24-25 to cement a plan to force banks to curb leverage, hold more equity capital and keep a greater pool of assets that can be easily traded. Restraining bankers’ pay and narrowing imbalances in trade and savings will also feature on the agenda as officials try to hammer out an accord to prevent a repeat of the worst crisis since the Great Depression and ensure a sustained recovery.

By limiting the scope of banks to invest and trade, governments may check this year’s 22 percent gain in the Standard & Poor’s 500 Financial Index. That may be a price they’re willing to pay to prevent a repeat of the risk-taking that sparked the collapse of Lehman Brothers Holdings Inc. a year ago, a worldwide recession and taxpayer-funded bank rescues.

“Regulation will make banks less profitable by increasing the cost of doing business,” said Andrew Clare, a professor at Cass Business School in London and a former Bank of England official. “If banks are going to benefit from taxpayer largesse then they need to act in a way that doesn’t hurt taxpayers or the economy.”

Balanced Economy

The summit, which will also be attended by U.K. Prime Minister Gordon Brown, French President Nicolas Sarkozy and Chinese President Hu Jintao, will also debate how to drive the economic recovery, avoid protectionism, improve accountancy and revamp governance of the International Monetary Fund. The officials will also try to devise a framework to generate a more balanced world economy through greater U.S. savings, European investment and Chinese domestic-demand.

Leaders travel to the Steel City amid voter disquiet after governments used public money to bail out banks only to see many of them quickly return to profit and resume setting aside billions for bonuses. Seventy-three percent of U.K. voters polled this month by YouGov wanted a tax imposed on all bonuses over 10,000 pounds. A Gallup poll in June showed that 59 percent of Americans wanted action to curb executive pay.

Capital Levels

Under consideration: forcing banks to augment their capital buffers to better account for risk, retain more earnings and satisfy a leverage ratio, which measures equity as a proportion of total holdings. They may also consider a proposal to tie pay to capital levels from Financial Stability Board Chairman Mario Draghi.

“There has been a culture that rewards short-term thinking, that used leverage to take exorbitant risks that were unsustainable for the system as a whole,” Obama said in a Sept. 14 interview with Bloomberg Television. “That’s the culture I think that we’ve got to reverse.”

The crackdown could lower profitability by a third at Goldman, Barclays and Deutsche Bank AG’s investment bank, JPMorgan Chase & Co. analysts led by Kian Abouhossein said in a Sept. 9 report.

Deutsche Bank’s return on equity will probably tumble the most among the world’s largest investment banks, falling to 6.7 percent in 2011 from 10 percent today, the analysts said. Goldman’s return on equity will decline by 4.4 percentage points and Barclays’ by 4.3 points.

Stock Drop?

“The amendments to capital requirements will clearly affect the activities of banks in their trading books and securitizations,” said Alessandra Mongiardino, a London-based analyst at Moody’s Investors Service.

Spokespeople for Goldman, Deutsche Bank and Barclays declined to comment.

Investors may suffer if financial companies have to issue more equity, said Charles Goodhart, a former Bank of England official and now a professor at the London School of Economics.

“Banks will have to raise more capital by issuing more equity so existing stocks will generally go down,” Goodhart said. The IMF estimated in April that U.S. and European banks would need $875 billion in extra capital.

To be sure, Goldman has demonstrated that higher capital and lower leverage don’t always mean reduced profits insurance quotes.

Record Profit

The company, which set aside a record $11.4 billion for compensation and benefits in the first half, cut its ratio of assets-to-common equity to 16 times in the second quarter from 26 times a year earlier. Goldman still set a new Wall Street profit record this year, making $3.4 billion on $13.8 billion of revenue in the three months that ended in June.

The new rules will probably also take years to go into effect, with U.S. Treasury Secretary Timothy Geithnerproposing that new capital requirements be in place by the end of 2012.

The British Bankers’ Association told Brown that tighter controls may stymie banks’ ability to help revive the economy. “Financial institutions cannot take steps to further increase the amount of capital they hold and at the same time lend that capital to businesses and consumers,” Stephen Green, chairman of the group and HSBC Holdings Plc, said in a letter today.

Since the demise of Lehman, some banks have already cut leverage, boosted capital by selling stock, and set aside a larger pool of easy-to-sell, or “liquid,” assets.

Raising Funds

Morgan Stanley, the sixth-biggest U.S. bank by assets, raised $6.92 billion through stock sales in May and June and cut its ratio of total assets-to-common equity to 18.3 times at the end of June from 30.9 times a year earlier. Barclays’ so-called surplus liquidity jumped to 88 billion pounds ($145 billion) at the end of June from 36 billion pounds six months earlier.

“Banks have already changed so substantially that it’s unlikely the G-20 can impose a further pinch in terms of beefing up liquidity or reducing leverage,” said Simon Gleeson, a regulatory lawyer at Clifford Chance LLP, the second-biggest law firm, in London.

Any agreement on capital buffers could see European banks as the biggest losers, which could provoke the ire of Sarkozy and German Chancellor Angela Merkel, who faces elections on Sept. 27. The region’s banks may have to sell more stock than U.S. rivals to satisfy new capital rules having relied on so- called hybrid securities to meet the current requirements.

New Rules

“It would be paradoxical if European banks were to be penalized in terms of competition against U.S. banks, given that the crisis originated in the U.S.,” says Baudouin Prot, chief executive officer of BNP Paribas SA, France’s largest bank, at the French Senate Finance Committee in Paris on Sept. 16. He said a leverage ratio would be “extremely difficult” to introduce.

Merkel and Sarkozy have campaigned for the G-20 to focus instead on bonuses, arguing excessive executive pay played a role in triggering the crisis. The summit may fall short of “high expectations,” Merkel said Sept. 19.

Financial firms and other companies should link executive pay to incentives that encourage measurable, long-term benefits for the business and shareholders, a Conference Board study recommended today. “In order to restore trust in the ability of boards of directors to oversee executive compensation, immediate and credible action must be taken,” the New York-based research group said.

‘Pushing Back’

The risk for politicians trying to persuade voters they haven’t let bankers off the hook is that the financial industry eventually finds a way around the regulatory revamp.

“We aren’t doing anything significant so far, and the banks are pushing back,” said Nobel laureate Joseph Stiglitz, a professor at Columbia University. “The leaders of the G-20 will make some small steps forward, given the power of the banks” and “any step forward is a move in the right direction.”

The G-20 accounts for about 85 percent of the world economy and the Pittsburgh talks will the third summit of its leaders in the past year. Its 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.

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