Monday 17 November 2008

G20 issue declaration and action plan

The G20 countries published a declaration at their summit on financial markets and the world economy held in Washington on November 15. The declaration contains an action plan which adopts the following principles for reform: strengthening transparency and accountability, enhancing sound regulation, promoting integrity in financial markets, reinforcing international cooperation and reforming international financial institutions. 

Amongst the proposals for immediate action are the following:

  • Regulators should develop enhanced guidance to strengthen banks' risk management practices, in line with international best practices, and should encourage financial firms to reexamine their internal controls and implement strengthened policies for sound risk management. 
  • Supervisors should collaborate to establish supervisory colleges for all major cross-border financial institutions, as part of efforts to strengthen the surveillance of cross-border firms. Major global banks should meet regularly with their supervisory college for comprehensive discussions of the firm's activities and assessment of the risks it faces.
  • The IMF, expanded FSF, and other regulators and bodies should develop recommendations to mitigate pro-cyclicality, including the review of how valuation and leverage, bank capital, executive compensation, and provisioning practices may exacerbate cyclical trends.
  • Regulators should take steps to ensure that credit rating agencies meet the highest standards of the international organization of securities regulators and that they avoid conflicts of interest, provide greater disclosure to investors and to issuers, and differentiate ratings for complex products. 
  • The international organization of securities regulators should review credit rating agencies' adoption of the standards and mechanisms for monitoring compliance.
Several of the medium-term objectives concern accounting and in this regard the action plan states:
  • The key global accounting standards bodies should work intensively toward the objective of creating a single high-quality global standard.
  • Regulators, supervisors, and accounting standard setters, as appropriate, should work with each other and the private sector on an ongoing basis to ensure consistent application and enforcement of high-quality accounting standards.

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