16 Mar 2009, David Benyon, Operational Risk & Regulation
HORSHAM, UK - Finance ministers and central bankers from the G-20 nations met in the UK on Saturday for a preliminary meeting ahead of the heads of state summit on April 2. The focus was on establishing preconditions for the expansion of existing international financial institutions, perhaps into a single, global institution.
The meeting, held south of London at Horsham in West Sussex, discussed the role of the World Bank, the Financial Stability Forum, the International Monetary Forum (IMF) and the World Trade Organisation (WTO) in developing future effective global macroeconomic supervision. UK prime minister Gordon Brown had already stoked expectations before the G-20 summit by calling for "Bretton Woods 2" - in reference to the 1944 financial summit that founded the IMF, WTO and World Bank.
"The G-20 supports our proposal for a substantial increase to emergency IMF resources through a major enlargement of the New Arrangements to Borrow and expansion of its membership," said US Treasury secretary Tim Geithner. "We have asked the World Bank and other multilateral development banks to leverage existing resources by flexible use of their balance sheets to help meet financing needs.
"Alongside this framework, we have expanded membership of the Financial Stability Forum, and we should elevate its role in the international system so that the global economy has - alongside the original Bretton Woods institutions of the IMF, the World Bank and the WTO - a strong institution able to lead these critical efforts to a more robust framework of oversight and standards for the global financial system," said Geithner.
The US Treasury secretary said national regulatory change must be matched by the international reforms. He said the US would soon embark on its own comprehensive framework of regulatory reform but because "risk does not respect national borders" the G-20 agreed it was necessary to make concrete changes at international level.
Geithner broke down the areas of reform into four priority areas: "First, all institutions that are important to the stability of the financial system should come within a much stronger framework of oversight, with clearer rules of the game that are enforced more evenly and consistently across countries. Second, all markets, including the derivatives markets, need to be subject to standards for stability and a framework for disclosure. Third, looking forward we need to provide much stronger cushions of stability to ensure that the framework of capital requirements and accounting standards dampens rather than amplifies future financial crises. Fourth, we must promote financial market integrity. We welcome Switzerland's announcement to increase information sharing as part of the global effort to end tax evasion."
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