The world's top economies scrapped plans for a universal global bank tax on Saturday, giving countries plenty of wiggle room over how to make banks pay for their bailouts in future.
Finance ministers from the Group of 20 countries ended a two-day meeting to review progress on a string of initiatives agreed last year to make the financial system safer and protect taxpayers from having to pay for bank rescues again.
Attempts to introduce a global bank levy were finally ditched in the face of opposition from Japan, Canada and Brazil whose banks needed no public aid during the worst financial crisis since the 1930s.
There is no agreement to proceed with an ex ante bank tax, said Canadian Finance Minister, Jim Flaherty.
The G20 said it recognized there was a range of policy approaches and that it will approve a set of principles later this month in Toronto on how to protect taxpayers.
British Finance Minister George Osborne reiterated his pledge to introduce a UK bank tax regardless of what other countries do and will spell out his plans in a budget report on June 22.
Different countries will do different things but to have it under the umbrella of the G20 is going to be helpful, Osborne told reporters.
Britain was forced to shore up the banking sector and rescue several individual firms.
The meeting did not agree any new regulation or alter deadlines for implementing steps agreed last year.
But ministers sought to keep plans for tough new Basel III bank capital and liquidity rules on course for implementation by the end of 2012 despite deep-seated concerns among several countries.
We are on track to deliver the proposals at the Seoul summit in November. Ministers are fully engaged in finding the right compromises, Financial Stability Board Chairman, Mario Draghi, told reporters.
Several finance ministers signaled that a lengthy phase-in for Basel III beyond 2012 was now inevitable.
Draghi, who overseas implementation of the G20's financial reform pledges, said Basel was not expected to take full effect by that deadline.
The key thing is to start the implementation in 2012. Then we will kind of find out what are the most appropriate transition times, Draghi said.
Banks warn that piling on tougher requirements too soon will force them to raise fresh capital at the expense of being able to lend to aid economic recovery.
Draghi said two percentage points of higher capital requirements would halve the probability of systemic risk.
Osborne said there was some room for variation over a tougher definition of bank capital but everyone understands this is the absolute central part of creating a safer and better regulated global banking system.
The G20 also agreed to speed up introduction of measures to improve transparency, regulation and supervision of hedge funds, credit rating agencies, bank pay and off-exchange traded derivatives.
We are also committed to improve the functioning and transparency of commodities markets, the G20 statement said.
Some policymakers have accused speculators of abusing commodities markets.
Draghi played down expectations that the G20 will usher in a slew of additional measures beyond what it agreed last year.
We have a priority, it's to move forward on Basel III, Draghi said.
Despite the failure to make headway on a universal bank levy and slippage in full Basel III roll-out, policymakers noted that the United States is expected within weeks to approve the most sweeping reform of financial rules since the 1930s that will introduce the bulk of G20 reform pledges.
The European Union is also well advanced in adopting new rules on supervision and hedge funds, with a draft law on derivatives regulation due next month.
Elena Salgado, economy minister of EU president Spain said more EU regulation was needed for credit ratings agencies, which lacked transparency and accountability.
To have a European credit ratings agency is another issue; perhaps it would be good, but it's something that cannot be done from one day to the next, Salgado told Reuters.