22 February 2009

Pre-G20 summit demands global system of supervision and oversight

European leaders call for tighter oversight of financial markets, including for hedge funds, credit rating agencies and other private pools of capital. All financial markets, products, and participants should be subject to supervision and regulation.

European leaders call for tighter oversight of financial markets, including for hedge funds and Private Equity companies. All financial markets, products, and participants should be subject to supervision and regulation, including hedge funds, rating agencies and other private pools of capital, the heads of states declared.

 

In a preparatory meeting ahead of the G20 meeting in London on 2^nd April the heads of states of major European Countries agreed to make concrete improvements on the way towards a stable world financial order. Members participating in the meeting were Great Britain, France, Italy, Spain and the Netherlands, Luxembourg, for other Eurozone countries, as well as representatives of the European Commission and the European Central Bank.

 

German Chancellor Angela Merkel stated that the meeting outlined some recommendations that may become the foundations of a common procedure to combat the financial crisis.

 

Key points included discussions on how to urge banks to keep larger reserves of capital and to protect the financial system from the pro-cyclical effects of regulatory measures.

 

Merkel called for a ‘Global Charter of Sustainable Economic Activity’ to reduce economic imbalances and stabilize financial markets. The foundations should be set in the G20 meetings in London, and in a second step during the meeting in Rome. The charter would subject all financial market activities around the globe to regulation, including credit rating agencies.

 

British Prime Minister Gordon Brown called for a 'Gobal New Deal' to aid the recovery of the world economy and provide a set of principles for a sound economic future. The 'grand bargain' would involve a global economic and fiscal stimulus, global financial control mechanisms and be based on sound banking principles, the PM said

 

Other key points included adopting sanctions to safeguard against ‘tax havens’. Also, Europe should develop common guidelines when it comes to the question of how to deal with illiquid assets and the creation of bad banks. Compensation and bonuses schemes are also said to be on the list.

 

To protect the financial system from the pro-cyclical effects of regulatory measures, the FSF, the Basel Committee and the European Commission are called to make proposals in due course, heads of states agreed.

 

IMF and FSF should monitor the implementation of 47 points made in the action plan agreed in Washington and should play a bigger role in crises prevention mechanisms.

 

Summary (German only)

See German PR 1 and PR2