World leaders agree to step up financial oversight

By John Poirier and Rachelle Younglai

WASHINGTON (Reuters) - Leaders of the world's 20 largest economies vowed on Saturday to toughen oversight of the troubled financial system, but stopped short of calling for a global super-regulator or new restrictions on hedge funds.

At an economic summit hosted by soon-to-depart U.S. President George W. Bush, officials faulted regulators and policymakers for not tackling financial problems and agreed on a foundation for reform.

Rich and developing nations alike, many having recently bailed out their banking sectors, blamed credit rating agencies, complex derivatives, banks, accounting standards, executive compensation and regulators.

Leaders agreed that "colleges" of international supervisors were needed for all major global financial institutions, such as Swiss-based UBS AG or Goldman Sachs.

Financial industry experts said it was significant that the 20 largest economies met to discuss financial markets. However, they called the G20 statement vague and broad.

"In terms of the substance, it's remarkably bland," said Edwin Truman, senior fellow at the Peterson Institute for International Economics, a think tank in Washington, D.C.

"Even the description of supervisory colleges for large complex institutions is pretty vague," Truman said. "It's not much more than what goes on today."

Some financial industry reforms are already in motion.