As police clashed with rioters in the streets of Pittsburg, G20 leaders worked out a number of banking reforms proposed by Europe and Canada, including tying the size of executive bonuses to company performance during the G20 meeting.

The leaders are expected to bring in restrictions on the salaries of bank executives, in hopes of avoiding future taxpayer bailouts for failing companies, while bankers continue to rake in bonuses.

The new measures based on the Canadian banking model will demand that banks keep more money on reserve to repay debts if something goes wrong, and shrink bonuses if banks do poorly.

Other suggestions include paying bankers in stock, giving them a personal financial interest in making the company do well financially.

The report will be given to leaders on Friday for approval, but it appears each country will come up with their own rules at home.

Agenda

It is expected the discussions Friday will focus around strengthening the global banking system.

But German Chancellor Angela Merkel said the focus should be on fulfilling earlier promises to reform the global financial market rather than focus on stimulating economic growth.

"We must not search for substitute topics and, beyond that, forget financial market regulation," Merkel told reporters in Germany before leaving for the summit. "Politicians must have the courage to do something that will not be immediately welcomed by all banks."

The summit began with a dinner Thursday at Pittsburgh's Phipps Conservatory and Botanical Gardens, hosted by U.S. President Barack Obama and his wife, Michelle.

Obama has said he wants the G20 to agree to a global plan that would see countries restructure the way they manage their economies. The plan would curb dangerous imbalances such as the deep trade deficits of the U.S. compared with the large trade surpluses in China, Japan and Germany.

In order to appease China and other emerging economies, G20 leaders will discuss giving the countries more influence at the International Monetary Fund, though some European leaders are resisting the plan.

The environment will be another contentious issue.

Obama said he would encourage the leaders to quit handing out subsidies that supports the use of fossil fuels.

Rioters tear gassed

Before the meeting, Pittsburgh police used pepper spray and tear gas to quell hundreds of anti-capitalism demonstrators who threw rocks at police and smashed store windows as they protested the G20 Summit.

The protesters were marching toward the convention centre where the leaders from 20 of the world's top economies like Canada, the U.S., India, and China met Thursday.

The marchers managed to go only a few blocks before police shut them down for not having a permit.

Some were arrested but there are no definite numbers as to how many.

With files from The Associated Press and The Canadian Press