G20 launches plan for global financial reform[fr][de] 

Meeting at a summit in Washington over the weekend (15 November), world leaders agreed that additional measures were needed to stabilise financial markets and support economic growth as the economic slowdown starts hitting both developed and developing nations.

"We agreed that a broader policy response is needed, based on closer macroeconomic cooperation, to restore growth," the leaders said in a statement . 

Measures to stimulate growth include "fiscal measures to stimulate domestic demand" and help emerging and developing economies gain access to finance in the face of the credit squeeze. 

Moreover, leaders agreed to "reject protectionism", saying it "exacerbates rather than mitigates financial and economic challenges".

A programme was put forward to reform the global financial system, containing both short-term and medium-term responses. 

Reforming international financial institutions

Immediate action, to be taken by 31 March 2009, includes expanding membership of the Financial Stability Forum (FSF) to a greater number of emerging economies. 

In the medium term, the G20 agreed that emerging and developing economies should be given a louder voice and greater representation in institutions like the International Monetary Fund and the Financial Stability Forum (FSF). "We underscored that the Bretton Woods Institutions must be comprehensively reformed so that they can more adequately reflect changing economic weights in the world economy and be more responsive to future challenges," world leaders said. 

Regulation and oversight

Further steps to be undertaken by the end of March 2009 include enhancing the "disclosure of complex financial instruments by firms to market participants" in order to address "weaknesses in accounting and disclosure standards" by financial institutions.

Regulators will also try to "mitigate" pro-cyclical behaviour by banks, "including a review of how valuation and leverage, bank capital, executive compensation and provisioning practices may exacerbate cyclical trends".

G20 countries also committed to undertaking "a review of the scope of financial regulation, with a special emphasis on institutions, instruments and markets that are currently unregulated". In doing so, G20 members said they would ensure that "all systemically-important institutions are appropriately regulated".

Reform of credit rating agencies will ensure that they "avoid conflicts of interest, provide greater disclosure to investors and to issuers and differentiate ratings for complex products". In the medium term, a registration system should be introduced for all credit rating agencies and a "global accounting standards" should be introduced.

Promoting integrity in financial markets

Immediate actions, to be taken by 31 March 2009, include enhancing "regulatory cooperation between jurisdictions on a regional and international level" and strengthening information sharing about threats to market stability.

In the medium term, authorities should implement measures to "protect the global financial system" from "non-transparent jurisdictions that pose risks of illicit financial activity," including money laundering and terrorist financing. "Lack of transparency and a failure to exchange tax information should be vigorously addressed."

Reinforcing international cooperation

Further actions to be taken by the end of March 2009 include establishing "supervisory colleges for all major cross-border financial institutions as part of efforts to strengthen the surveillance of cross-border firms".

In the medium term, authorities will look at areas where increased convergence is needed, such as "accounting standards, auditing and deposit insurance".