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Financial regulation
The Group of 20 nations (G20) ended their summit by asking regulators to design extra safeguards for top banks, complete tighter rules for big insurers, and meet set deadlines for reforming the $60 trillion "shadow banking" sector.
President of the Russian Federation Vladimir Putin stated in his speech ahead of the second day of discussions that one of the key factors in the economic slowdown and stagnation in employment was a significant drop in long-term investment: "Overall, we see a whole series of problems: fragmentation in the European Union's banking system, a shrinking fiscal base, development banks' lower lending potential, and more stringent financial regulation".
As Reuters reports, the G20 leaders said in their final communiqué that they were committed to maintain the momentum of reform as long as necessary. Countries should defer to each other when it is justified by the quality of their respective regulatory and enforcement regimes that are based on similar outcomes, the communiqué said further. The G20 leaders were "resolved" to see the financial reform agenda through to its completion in a manner that avoids compromising the global financial system. The G20 also said fragmentation within Europe was one of the main challenges to the global economy and urged "decisive implementation" of a planned Banking Union.
The G20 summit asked its regulatory task force, the Financial Stability Board (FSB), to develop proposals by end-2014 to ensure top banks have enough bonds to tap in times of trouble and avoid relying on taxpayers. This could help restore trust among regulators that their taxpayers would no longer be on the hook. The summit backed similar work for top insurers and to develop the first capital adequacy rule for the sector.
The FSB will also design rules by the end of 2013 on identifying big institutions, such as clearing houses, that require extra safeguards. As expected, the summit backed a timetable for new rules for regulating "shadow banking" activities like repurchase markets and securities lending, with checks on implementation starting in 2015.
Olli Rehn, European Commissioner for economic and monetary affairs, wrote on his blog that the G20 had helped Europe confront this crisis - now it had to help the world avert another. "The focus of the discussions was much less on Europe than before, but on the emerging market economies, where there are some signs of a build-up of imbalances similar to those that ultimately led the EU into its current trouble", he wrote. "The G20 again has a chance to prove its value by allowing an early identification of the emerging issues, as well as coordination of early efforts to tackle them before they become problems with global impacts."
Tax
A series of actions have been agreed by the G20 leaders in the next step towards securing new global standards for tackling tax evasion and avoidance. In HM Treasury’s press release, it was reported that the world leaders had given their backing to the Organisation for Economic Cooperation and Development’s (OECD) action plan on base erosion and profit shifting (BEPS), presented to G20 finance ministers at July’s Moscow meeting.
To strengthen their efforts to tackle tax evasion, the leaders committed to a new global standard based on automatic tax information exchange, and called on the OECD to draw up the standard by February 2014.
Ms Christine Lagarde, Managing Director of the International Monetary Fund (IMF), applauded in her statement the progress that was made in discussions on tax evasion and tax avoidance. International taxation would be an area where the IMF would be actively engaged.
Angel Gurría, OECD Secretary-General, commented similarly: The tax agenda of the G20 was one of the most meaningful deliverables of the group, he said, stating that the measures that would be taken to fight tax evasion and tax erosion will provide the necessary resources to finance growth enhancing public investment, restore the health of public finances and promote job creation. "Moreover, the OECD is now preparing to migrate towards a new, more ambitious, single global standard: automatic exchange of tax information for which 56 countries, including all G20 members, have already signed the Convention on Mutual Administrative Assistance in Tax Matters", he said. "We are looking at ways to close loopholes in international tax rules that allow companies to artificially shift profits away from the countries in which they are generated."
National reactions
Prime Minister David Cameron spoke at a press conference at the G20 Summit, applauding the fact that all 20 countries had signed up to the St Petersburg Action Plan that emphasises the importance of dealing with debts, the role of monetary policy to support the recovery and the need for long-term reforms to boost growth and trade. Crucially, he said, plans for international tax laws would not be restricted to advanced economies.
As Reuters reported, French President François Hollande welcomed the joint call by G20 leaders to increase the momentum of the global recovery, stating at a press conference that they had achieved tangible results on growth and jobs.
Analysis by the Deutsche Bank Research Team, arguing that the G20 is not living up to its initial promise of becoming the "premier forum for international economic cooperation".
The IMF has published its assessments of the sustainability of the G20 economies as part of the mutual assessment process (MAP) introduced in 2009. This report, entitled "Imbalances and Growth", which was updated in September 2013, observes a reduction in the imbalances in the G20 economies in spite of a great deal of work that remains to be done to maintain durable growth. Several members including China, India, France, Germany, Japan, UK, USA and the eurozone have been identified as having relatively significant imbalances. To remedy this, the IMF is inviting these countries to implement policies to facilitate re-balancing and to support growth