16 November 2008

G20 Leaders agree on action plan and intensified co-operation

Leaders underlined the need for intensified international co-operation among regulators and stronger international standards. They also agreed on the establishment of supervisory colleges for all major cross-border financial institutions. 

In a common declaration G20 Leaders agreed on a set of five common principles for reforming financial markets and launched an action plan of 50 measures to be implemented in the short and medium term. Leaders found that 'inconsistent and insufficiently co-ordinated macro-economic policies' and 'inadequate structural reforms' were among the underlying factors to the current situation.

 

Leaders underlined that "intensified international co-operation among regulators and strengthening of international standards, where necessary and their consistent implementation is necessary". They furthermore agreed to "avoid potentially adverse impacts on other countries, including regulatory arbitrage".

 

Some 31 concrete immediate actions should to be taken until 31 March 2009, including the establishment of supervisory colleges for all major cross-border financial institutions. 

 

G-20 members will meet again by 30 April 2009 to review the implementation of the principles and decisions agreed.

 

The five common principles for reform are:

Ø       Strengthening Transparency and Accountability:

Ø       Enhancing Sound Regulation:

Ø       Promoting Integrity in Financial Markets:

Ø       Reinforcing International Co-operation:

Ø       Reforming International Financial Institutions:

 

The immediate action to be taken by Finance Ministers are:

Ø       Mitigating against pro-cyclicality in regulatory policy;

Ø       Reviewing and aligning global accounting standards, particularly for complex securities in times of stress;

Ø       Strengthening the resilience and transparency of credit derivatives markets and reducing their systemic risks, including by improving the infrastructure of over-thecounter markets;

Ø       Reviewing compensation practices as they relate to incentives for risk taking and innovation;

Ø       Reviewing the mandates, governance, and resource requirements of the IFIs; and

Ø       Defining the scope of systemically important institutions and determining their appropriate regulation or oversight.

 

In concrete, the action plan to implement the five agreed principles includes:

Ø       Accounting standard setters should significantly advance their work to address weaknesses in accounting and disclosure standards for off-balance sheet vehicles. The medium-term goal is to create a single high-quality global accounting standard.

Ø       A review of the scope of financial regulation should be undertaken, with a special emphasis on institutions, instruments, and markets that are currently unregulated, along with ensuring that all systemically-important institutions are appropriately regulated.

Ø       Credit Rating Agencies are to avoid conflicts of interest, provide greater disclosure to investors and to issuers, and differentiate ratings for complex products and should be registered.

Ø       Supervisors and central banks should develop robust and internationally consistent approaches for liquidity supervision of, and central bank liquidity operations for, cross-border banks.

Ø       The need for central counterparty services for credit default swaps is underlined.

Ø       Regulators should develop enhanced guidance to strengthen banks' risk management practices.

 

Full Declaration

White House Fact Sheet

 

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