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“Major failures in the financial sector and in financial regulation and supervision were fundamental causes of the crisis”, the Leaders of the Group of Twenty stated in their communiqué and agreed to build “a stronger, more globally consistent, supervisory and regulatory framework for the future financial sector”.
G20 members agree to establish much greater consistency and systematic co-operation between countries, and the framework of internationally agreed high standards.
In a declaration on the ‘Strengthening the Financial System’, G20 members agree:
Ø to establish a new Financial Stability Board (FSB) with a strengthened mandate, as a successor to the Financial Stability Forum (FSF), including all G20 countries, FSF members, Spain, and the European Commission;
Ø that the FSB should collaborate with the IMF to provide early warning of macro-economic and financial risks and the actions needed to address them;
Ø to reshape our regulatory systems so that our authorities are able to identify and take account of macro-prudential risks;
Ø to extend regulation and oversight to all systemically important financial institutions, instruments and markets. This will include, for the first time, systemically important hedge funds;
Ø to endorse and implement the FSF’s tough new principles on pay and compensation and to support sustainable compensation schemes and the corporate social responsibility of all firms;
Ø to take action, once recovery is assured, to improve the quality, quantity, and international consistency of capital in the banking system. In future, regulation must prevent excessive leverage and require buffers of resources to be built up in good times;
Ø to take action against non-co-operative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. We note that the OECD has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information;
Ø to call on the accounting standard setters to work urgently with supervisors and regulators to improve standards on valuation and provisioning and achieve a single set of high-quality global accounting standards; and
Ø to extend regulatory oversight and registration to Credit Rating Agencies to ensure they meet the international code of good practice, particularly to prevent unacceptable conflicts of interest.
London Summit – Leaders’ Statement
Declaration on strengthening the financial system