G20: the unfinished agenda
23 Oct 2010
Finance ministers and heads of central banks of member countries of the Group of 20 emerging and developed countries today ended their two-day meeting after signing off on a series of measures on regulation for approval at the meeting of leaders in Seoul next month.
The G20 is reported to have agreed to move toward market-determined exchange rates and to pursue the full range of policies needed to reduce excessive external imbalances.
The November meeting of leaders of the G20 countries is expected to take up some of the key reforms in the financial sector, including the Basel III package and the recommendations of the financial stability board.
The `Basel III' package, approved by the Basel Committee of central bankers and regulators in September and intended to toughen global capital and liquidity requirements for banks from 2013, forms the cornerstone of the G20's reforms package for the global economy hit by the financial market crisis.
The package, hailed as a major advance in financial stability, is expected to be approved in its current form at the G20 summit in November.
The Financial Stability Board (FSB) was set up by the G20 to frame regulations that would help prevent a repeat of the failure of the "systemically important financial institutions" - a reference to the 30 biggest banks in the world whose failure would destabilise the broader financial system.
These will ensure guidelines for all financial institutions and subject them to increased "intensity" of supervision, bringing big lenders also under strict regulations.
The "too big to fail" firms would have to subject themselves to extra "loss absorption" capacity through a combination of base capital surcharge, contingent capital - or a bond that converts into equity when an agreed trigger point is hit - and a bail-in debt (where a bank's creditors agree in advance to have a restructuring imposed on them if the firm hits the skids).
