BANGKOK, THAILAND – Several representatives from the Task Force on Financial Integrity & Economic Development will appear on a panel Saturday at the 14th International Anti-Corruption Conference (IACC). The four day gathering of world leaders, academics, civil society representatives and private-sector business executives–all addressing the issue of international corruption–comes to a close Saturday evening in Bangkok.

Task Force representatives François Valérian of Transparency International (TI), Raymond Baker of Global Financial Integrity (GFI), and Robert Palmer of Global Witness will join a few other representatives of TI—including TI Chair Huguette Labelle—on a panel titled “G20, the Day After. Immediate Civil Society Reactions to the Seoul Nov 11-12th G20 Summit.”

The IACC website describes the discussion as follows:

The financial and economic crisis that broke out in fall 2008 has had disastrous consequences trapping millions in poverty worldwide, triggering a devastating rise in unemployment and placing national economies at risk. There is increasing evidence that corruption and fraud have contributed significantly in causing the financial crisis and they have been a prime cause of the serious decline in public confidence in both financial services firms and government regulators. In order to avoid another crisis substantial and sustainable reforms of the international financial architecture and system that reduce risk and increase transparency, accountability and integrity are needed.

Sustainable financial regulatory reforms should address the excessive culture of deregulation, the incentives for short-term risk-taking, the opacity of financial markets and products and the privatisation of profit concomitant to the socialisation of loss. The initial reaction of states to the crisis has been a massive injection of cash flows into the financial system in order to bail out companies. This measure may on a short term basis serve to save economies from collapsing, but it does not provide a long-term answer to the risks of the current practices and systems. To restore global confidence and reduce opportunities for corruption and fraud reforms need to include enhanced government oversight and regulation, enhanced public transparency as well as accountability of the relevant public and private actors, increased international coordination, especially in the fight against financial crime, built-in incentives for long-term action as well as improved corporate governance.

This special session will formulate an immediate civil society reaction to the outcomes of the Seoul G20 Summit and hold leaders to account for progress made on the initially ambitious reform agenda.

Earlier today, the Task Force released its own official statement on the outcome of the G20 Seoul Summit commending the G20 for addressing development and corruption while criticizing the world leaders for failing to promote transparency.  The statement quotes–among others–GFI Director Raymond Baker, who will be participating in the IACC panel tomorrow, which will be streamed live on the IACC website when the session begins at 14:00 ICT (Bangkok time), 08:00 CET (Paris time), 07:00 GMT (London time), and 02:00 EST (Washington, DC time).  Reacting to the G20 earlier today, Task Force members said:

“The Seoul Development Consensus for Shared Growth, includes some innovative ideas like strengthening tax collection powers in developing countries. Likewise the Action Plan from the corruption working group proposes positive steps on asset recovery, money laundering, and visa bans for corrupt officials,” said Gavin Hayman, Campaigns Director of Global Witness. “But the G20 has missed the opportunity to take concrete action to promote transparency in the financial system that will really have an impact on corruption, tax evasion and poverty.”

“What is missing from the Seoul communiqué are the key elements of global financial transparency: country by country reporting for multinational corporations, automatic tax information exchange, full disclosure of corporate ownership or beneficiaries of offshore trusts and accounts, and a tougher stance on non cooperative jurisdictions,” said John Christensen, director of the Tax Justice Network.

“Crime, corruption, and tax evasion drive $1 trillion out of the developing world every year,” said Global Financial Integrity director Raymond Baker.  “That’s $10 lost for every $1 that comes in as aid.  This money ends up in tax havens as well as banks in G20 nations.  Transparency would stem this outflow of dirty money by making it harder for criminals and kleptocrats to stash their dirty money abroad.”

“G20 leaders don’t have time to waste,” said Nuria Molina-Gallart, director of the European Network on Debt and Development.  “In 2011 the G20 must put into place concrete measures to ensure that big corporations and financial institutions comply with the highest standards of financial transparency and integrity.  The global playing field must be leveled for developing countries to have a shot at sustained and robust development in the post economic crisis recovery.”

A lot of ideas are packed into these four paragraphs, leaving plenty to discuss at the IACC session tomorrow.  Be sure to watch the live stream of the event here on the IACC website.

For more information on the panel, visit the IACC website here.

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SEOUL, KOREA – New plans from the G20 to tackle corruption and promote development are welcome commitments, said the Task Force on Financial Integrity and Economic Development (Task Force) following the conclusion of the G20 Summit in Seoul today. However, the group warned that key reforms were still missing.

“The Seoul Development Consensus for Shared Growth, includes some innovative ideas like strengthening tax collection powers in developing countries. Likewise the Action Plan from the corruption working group proposes positive steps on asset recovery, money laundering, and visa bans for corrupt officials,” said Gavin Hayman, Campaigns Director of Global Witness. “But the G20 has missed the opportunity to take concrete action to promote transparency in the financial system that will really have an impact on corruption, tax evasion and poverty.”

“What is missing from the Seoul communiqué are the key elements of global financial transparency: country by country reporting for multinational corporations, automatic tax information exchange, full disclosure of corporate ownership or beneficiaries of offshore trusts and accounts, and a tougher stance on non cooperative jurisdictions,” said John Christensen, director of the Tax Justice Network.

“Crime, corruption, and tax evasion drive $1 trillion out of the developing world every year,” said Global Financial Integrity director Raymond Baker. “That’s $10 lost for every $1 that comes in as aid. This money ends up in tax havens as well as banks in G20 nations. Transparency would stem this outflow of dirty money by making it harder for criminals and kleptocrats to stash their dirty money abroad.”

“G20 leaders don’t have time to waste,” said Nuria Molina-Gallart, director of the European Network on Debt and Development. “In 2011 the G20 must put into place concrete measures to ensure that big corporations and financial institutions comply with the highest standards of financial transparency and integrity. The global playing field must be leveled for developing countries to have a shot at sustained and robust development in the post economic crisis recovery.”

###

Download the Seoul Summit Document to your left.

Source: G20 Seoul Summit Official Website

Download the Seoul Summit Leaders Declaration to your left.

Source: G20 Seoul Summit Official Website

Meeting of Finance Ministers and Central Bank Governors, Gyeongju, Republic of Korea

October 23, 2010

1. We, the G20 Finance Ministers and Central Bank Governors, met with a sense of urgency to fully address the economic challenges facing us today in preparation for the Seoul Summit.

2. The global economic recovery continues to advance, albeit in a fragile and uneven way. Growth has been strong in many emerging market economies, but the pace of activity remains modest in many advanced economies. Downside risks remain and are different from country to country and region to region. Yet, given the high interdependence among our countries in the global economic and financial system, uncoordinated responses will lead to worse outcomes for everyone. Our cooperation is essential. We are all committed to play our part in achieving strong, sustainable and balanced growth in a collaborative and coordinated way. Specifically, we will:

● pursue structural reforms to boost and sustain global demand, foster job creation and increase growth potential;

● complete financial repair and regulatory reforms without delay;

●  in advanced countries, formulate and implement clear, credible, ambitious and growth-friendly medium-term fiscal consolidation plans in line with the Toronto Summit commitments, differentiated according to national circumstances. We are mindful of the risks of synchronized adjustment on the global recovery and of the risks that failure to implement consolidation, where immediately necessary, would undermine confidence and growth;

● continue with monetary policy which is appropriate to achieve price stability and thereby contributes to the recovery;

●  move towards more market determined exchange rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies. Advanced economies, including those with reserve currencies, will be vigilant against excess volatility and disorderly movements in exchange rates. These actions will help mitigate the risk of excessive volatility in capital flows facing some emerging countries. Together, we will reinvigorate our efforts to promote a stable and well-functioning international monetary system and call on the IMF to deepen its work in these areas. We welcome the IMF’s work to conduct spillover assessments of the wider impact of systemic economies’ policies;

● continue to resist all forms of protectionist measures and seek to make significant progress to further reduce barriers to trade; and

●  strengthen multilateral cooperation to promote external sustainability and pursue the full range of policies conducive to reducing excessive imbalances and maintaining current account imbalances at sustainable levels. Persistently large imbalances, assessed against indicative guidelines to be agreed, would warrant an assessment of their nature and the root causes of impediments to adjustment as part of the Mutual Assessment Process, recognizing the need to take into account national or regional circumstances, including large commodity producers. To support our efforts toward meeting these commitments, we call on the IMF to provide an assessment as part of the MAP on the progress toward external sustainability and the consistency of fiscal, monetary, financial sector, structural, exchange rate and other policies.

3. Building on the success of the Toronto Summit, the Framework for Strong, Sustainable and Balanced Growth was refined, with the mutual assessment process carried out at country-level to tackle both short and medium term challenges. Informed by the IMF, the World Bank, the OECD, the ILO and other international organizations’ analyses, the Framework provided a solid and practical platform for international cooperation to take place. In response to the tough challenges facing the global economy, we are developing a comprehensive action plan to mitigate risks and achieve our shared objectives. We will submit this action plan for consideration by our Leaders at the November 2010 Seoul Summit. Recognizing the benefits of the Framework, we agreed to recommend to Leaders that the country-led and consultative Framework process should continue beyond the Seoul Summit.

4. We have made significant strides since the adoption of the Action Plan to Implement Principles for Reform at the Washington Summit in November 2008, with support from the FSB. We are committed to take action at the national and international level to raise standards, so that our national authorities implement global standards consistently, in a way that ensures a level playing field and avoids fragmentation of markets, protectionism and regulatory arbitrage. To build a stronger global financial system, we have agreed to prioritize the following issues on the agenda for the Seoul Summit:

● Welcome and commit to fully implement within the agreed timeframe the new bank capital and liquidity framework drawn up by the Basel Committee and the Governors and Heads Of Supervision.

● Endorsement of the FSB’s recommendations to increase supervisory intensity and effectiveness.

●  Endorsement of the policy framework, work processes and timelines proposed by the FSB to mitigate the risks posed by Systemically Important Financial Institutions and address the ‘too-big-to-fail’ problems.

● Commitment to implement all aspects of the G20 financial regulation agenda, in an  internationally consistent and non-discriminatory manner, including the commitments on OTC derivatives, compensation practices and accounting standards and FSB principles on reducing reliance on credit rating agencies.

● Further work on macro-prudential policy frameworks, including tools to help mitigate the impact of excessive capital flows; the reflection of the perspective of emerging market economies in financial regulatory reforms, including through increased outreach; commodity derivative markets; shadow banking; and market integrity.

● Pursue our work decisively to tackle Non-Cooperative Jurisdictions.

5. We have reached agreement on an ambitious set of proposals to reform the IMF’s quota and governance that will help deliver a more effective, credible and legitimate IMF and enable the IMF to play its role in supporting the operation of the international monetary and financial system. These proposals will deliver on the objectives agreed in Pittsburgh and go even further in a number of areas. Key elements include:

● shifts in quota shares to dynamic EMDCs and to underrepresented countries of over 6%, while protecting the voting share of the poorest, which we commit to work to complete by the Annual Meetings in 2012.

● a doubling of quotas, with a corresponding roll-back of the NAB preserving relative shares, when the quota increase becomes effective.

● continuing the dynamic process aimed at enhancing the voice and representation of EMDCs, including the poorest, through a comprehensive review of the formula by January 2013 to better reflect the economic weights; and through completion of the next regular review of quotas by January 2014.

● greater representation for EMDCs at the Executive Board through 2 fewer advanced European chairs, and the possibility of a second alternate for all multi-country constituencies, and

● moving to an all-elected Board, along with a commitment by the Fund’s membership to maintain the Board size at 24 chairs, and following the completion of the 14th General Review, a review of the Board’s composition every 8 years.

6. We welcomed the recent reform of the IMF lending facilities, including the enhancement of the Flexible Credit Line and the establishment of the Precautionary Credit Line to strengthen the global financial safety nets. We call on the IMF to continue its work to further improve the global capacity to cope with shocks of a systemic nature.

7. We look forward to the multi-year action plan of the G-20 Working Group on Development to promote inclusive and sustainable economic growth and resilience in developing countries. We are committed to meeting the Millennium Development Goals by 2015 and will reinforce our efforts to this end, including through the use of the Official Development Assistance. We reaffirm our commitment to an ambitious replenishment of the World Bank’s International Development Association.  We welcomed the progress of the Global Agriculture and Food Security Program in rapidly scaling up agriculture assistance in several developing countries and invite further contributions.

8. We welcomed a set of actions identified to improve access to financial services for the poor and SMEs. We welcomed the strong response to the SME Finance Challenge and look forward to the announcement of the innovative winning entries at the Seoul Summit. We agreed to develop a funding framework to support the effective implementation of the winning proposals of the SME Finance Challenge. We agreed that a global consultative mechanism is needed to maximize the impact of the work on financial inclusion and enhance coordination amongst different initiatives and stakeholders.

9. We noted the progress made on rationalizing and phasing out inefficient fossil fuel subsidies and promoting energy market transparency and stability and agreed to monitor and assess progress towards this commitment at the Seoul Summit.

10. Recognizing the importance of enhancing public-private partnership to promote economic growth beyond the crisis, we welcome the work done by the 12 Seoul G20 Business Summit Working Groups.

11. We thanked Korea for hosting the Finance Ministers and Central Bank Governors meetings this year and welcomed France as chair in 2011.

–

Source: Official G20 Seoul Summit 2010 website (www.seoulsummit.kr)

1. We, the G20 Finance Ministers and Central Bank Governors, met in Washington D.C. to ensure the global economic recovery and the transition to a strong, sustainable and balanced growth as well as our agendas for the financial regulatory reform and international financial institutions remain on track.

2. The global recovery has progressed better than previously anticipated largely due to the G20’s unprecedented and concerted policy effort. However, it is proceeding at different speeds within and across regions, and unemployment is still high in many economies. We recognize that in such circumstances different policy responses are required. In economies where growth is still highly dependent on policy support and consistent with sustainable public finances, it should be maintained until the recovery is firmly driven by the private sector and becomes more entrenched. Some countries are already exiting. We should all elaborate credible exit strategies from extraordinary macroeconomic and financial support measures that are tailored to individual country circumstances while taking into account any spillovers. We emphasized the necessity to pursue well coordinated economic policies that are consistent with sound public finances; price stability; stable, efficient and resilient financial systems; employment creation; and poverty reduction. Countries who have the capacity should expand domestic sources of growth. This would help cushion a decline in demand from countries that should boost savings and reduce fiscal deficits.

3. Our Framework for Strong, Sustainable and Balanced Growth for the global economy is a key mechanism through which we will continue to work together to address the challenges associated with achieving a durable recovery and our shared objectives. In accordance with our timetable set out in St Andrews, we have conducted, with support from the IMF and World Bank, the initial phase of our cooperative and consultative mutual assessment process for the Framework by sharing our national and regional policy frameworks, programs and projections, assessing their collective consistency with our objectives, and producing a forward-looking assessment of global economic prospects. We further provided guidance to the IMF, and other international organizations, to assist us in assessing collective implications of national policies that could improve our global economic prospects and bring us closer to our shared objectives. For this purpose, we have agreed on principles to direct the development of alternative policy scenarios and have further elaborated the objectives of strong, sustainable and balanced growth as outlined in the Annex to this Communiqué. Drawing on these inputs we will deliver an initial set of policy options for consideration by our Leaders at the June 2010 Summit.

4. Recognizing the increasingly integrated nature of the financial regulatory reform issues, we reaffirmed our strong commitment to fully implement our reform agenda on the timelines agreed by Leaders in London and Pittsburgh. Good progress is being made and, to maintain the momentum, we:

• reaffirmed our reform is multi-faceted but at its core must be stronger capital standards, complemented by clear incentives to mitigate excessive risk-taking practices. We recommitted to developing by end-2010 internationally agreed rules to improve both the quantity and quality of bank capital and to discourage excessive leverage. These rules will be phased in as financial conditions improve and economic recovery is assured, with the aim of implementation by end-2012. Implementation of these new rules should be complemented by strong supervision. We stressed the importance of the quantitative and macroeconomic impact studies underway and look forward to an update on their progress by the FSB for our June meeting.
• agreed to closely review the progress of and provide guidance and strong support for the work of the FSB, BCBS and IMF. We support the work of the FSB to develop prudential standards, market infrastructures to contain the propagation of shocks and resolution tools and frameworks for systemically important financial institutions and look forward to a progress report for our meeting in June 2010. We look forward to receiving the IMF’s final report on the range of options that countries have adopted or are considering as to how the financial sector could make a fair and substantial contribution towards paying for any burdens associated with government interventions to repair the banking system. We call on the IMF for further work on options to ensure domestic financial institutions bear the burden of any extraordinary government interventions where they occur, address their excessive risk taking and help promote a level playing field, taking into consideration individual country’s circumstances. We welcomed the FSB, IMF and BCBS’s joint report on the inter-linkages between these issues and noted that, moving forward, we need to take into account the cumulative impact of the reforms on the financial system and the wider economy to move unequivocally in the direction of sound and stronger capital and liquidity framework ; and
• stressed the importance of achieving a single set of high quality, global accounting standards; implementing international standards with regard to compensation practices and welcomed the FSB’s report; completing the development of standards for central clearing and trading on exchanges or electronic platforms of all standardized over-the-counter derivative contracts, where appropriate, and reporting to trade repositories of all over-the-counter derivative contracts; and consistent and coordinated oversight of hedge funds and credit rating agencies. We welcomed the progress by the Financial Action Task Force in the fight against money laundering and terrorist financing, particularly regarding the issue of a public statement on jurisdictions with strategic deficiencies last February. We also welcomed the report by the Global Forum on Tax Transparency and Exchange of Information, the launch of the peer review process, and the development of a multilateral mechanism for information exchange which will be open to all countries. We welcomed the launch of the evaluation process by the FSB on the adherence to prudential information exchange and cooperation standards in all jurisdictions.

5. We noted the draft report on the scope of energy subsidies and suggestions for the implementation of the Pittsburgh commitment from the IEA, OPEC, OECD and World Bank. In accordance with country ownership and circumstances and recognizing the importance of providing those in need with essential energy services, we recommitted to prepare strategies and timetables for our meeting in June to rationalize and phase out, over the medium term, of inefficient fossil fuel subsidies that encourage wasteful consumption.

6. We urged progress to deliver on the representation and governance reforms of the International Financial Institutions agreed in Pittsburgh. We urged the IMF to deliver the quota and governance reforms by the November Seoul Summit. We look forward to an agreement on a package of voice reforms and World Bank financial resources, together with reforms to ensure effectiveness, at the upcoming Development Committee meeting. We will work towards ambitious IDA16 and African Development Fund replenishments. We welcomed the agreement in principle to increase the capital of the IaDB and EBRD and to adopt a robust reform agenda and look forward to the conclusion of discussions on general capital increase of the African Development Bank. We agreed to support full relief of Haiti’s debt by all IFIs, including through burden sharing, and welcomed the agreement at the IaDB and World Bank to relieve its debt and the establishment of the Haiti Reconstruction Fund.

7. We acknowledged the progress achieved by the Financial Inclusion Experts Group and look forward to the successful launch of the ‘SME Finance Challenge’. We welcomed the work of the Financial Safety Nets Experts Group and agreed to look at policy options to improve global financial safety nets, based on sound incentives, to better assist countries to deal with volatility in global capital flows. Inefficient markets and excess volatility in commodity prices more generally negatively affect both producers and consumers. We will finalize our work to address excessive commodity price volatility by improving the functioning and transparency of physical and financial markets in both producing and consuming countries.

8. We agreed to meet again on June 4-5 2010 in Busan, Republic of Korea, to prepare for the June Leaders’ Summit in Toronto, Canada.

The G-20 Framework for Strong, Sustainable and Balanced Growth

The primary goal of the Framework is to encourage G20 countries to implement coherent medium-term policy frameworks to attain a mutually beneficial growth path and avoid future crises. While G20 countries should adopt policy frameworks that are appropriate to their individual circumstances, there are clear benefits to collective action to achieve this goal. Such an approach would also raise living standards in emerging markets and developing countries.
Given that it may take several years to realise the benefits of many policy reforms, G20 countries should consider initiating actions now to attain stronger, and more balanced and sustainable growth over the medium term. Policy frameworks should be forward looking to guide expectations and to be sufficiently flexible to manage potential risks and facilitate adjustment to shocks so that strong, sustainable and balanced growth can be maintained.
The objectives of strong, sustainable and balanced growth are closely related and need to be pursued in a way that is mutually reinforcing.
Strong growth should
a. Close current output and employment gaps in G20 countries as soon as possible,
b. Converge to the growth rate of potential output over the medium term, and
c. Be enhanced over the long term by increasing potential output growth, primarily by efficiently utilizing available resources through the implementation of more effective structural policies.
Sustainable growth should be:
a. In line with underlying potential growth over the medium term, thereby providing a firm basis for long term growth,
b. Based on sustainable public finances and price and financial stability,
c. Resilient to economic and financial shocks,
d. Determined primarily by competitive market forces, and
e. Consistent with social and environmental policy goals.
Balanced growth should:
a. Be broadly based across all G20 countries and regions of the world,
b. Not generate persistent and destabilizing internal or external imbalances, and
c. Consistent with broad development goals, in particular, convergence to high standards of living across countries in the long run.
In providing this support to the G-20, the Fund should be informed by the general principles to which G-20 Leaders agreed last year in Pittsburgh (http://www.pittsburghsummit.gov/mediacenter/129639.htm). In addition to this context, the Fund should be guided by the following principles in developing the alternative policy scenarios:
1. The Fund should present a limited number of alternative policy scenarios to Deputies (i.e., no more than 3-4);
2. All scenarios must include policies aimed at ensuring a collective outcome that brings the G-20 closer to its shared objectives as laid out above;
3. All scenarios must demonstrate a shared contribution to adjustment and reform across the G-20 and that the mutual benefits of strong, sustainable and balanced growth should be broadly shared, taking into account the different stages of development for countries as well as the spillover effects across G-20 and non G-20 countries;
4. The Fund should consider the specific and feasible fiscal, monetary, structural and financial sector policy actions necessary to achieve our overarching objectives of strong, sustainable and balanced growth over the medium term;
5. The broad social, environmental and development impacts of the proposed policy recommendations in the scenarios should be considered;
6. The policy scenarios should consider the choices between the pace of implementing policy actions and their feasibility, credibility and effectiveness. As well, consideration should be given to the choices of raising global growth and of achieving more sustainable and balanced growth;
7. Given that it may take several years to realise the benefits of many policy reforms, the scenarios should consider the actions that can be taken now to attain stronger, and more balanced and sustainable growth over the medium term;
8. Policy actions for June should be expressed as actions for groups of countries facing similar circumstances, and regional economic institutions where appropriate, taking into account different national and regional economic structures and policy frameworks; and
9. The Fund should closely consult with G-20 countries throughout the process when assessing the sustainability and stability of an individual country’s macroeconomic policy.
In adopting these principles, the Fund’s report on alternative policy scenarios should clearly describe the global effects of adjustment, as well as the implications for member countries across a spectrum of indicators.
We will ask the World Bank to advise us on progress in promoting development and poverty reduction as part of rebalancing of global growth.
We also look forward to contributions from other international organizations, including the FSB on financial policies, the ILO on labor market policies, the WTO on trade policies, and the OECD and UNCTAD where appropriate.

1. We, the G20 Finance Ministers and Central Bank Governors, met in Washington D.C. to ensure the global economic recovery and the transition to a strong, sustainable and balanced growth as well as our agendas for the financial regulatory reform and international financial institutions remain on track.

2. The global recovery has progressed better than previously anticipated largely due to the G20’s unprecedented and concerted policy effort. However, it is proceeding at different speeds within and across regions, and unemployment is still high in many economies. We recognize that in such circumstances different policy responses are required. In economies where growth is still highly dependent on policy support and consistent with sustainable public finances, it should be maintained until the recovery is firmly driven by the private sector and becomes more entrenched. Some countries are already exiting. We should all elaborate credible exit strategies from extraordinary macroeconomic and financial support measures that are tailored to individual country circumstances while taking into account any spillovers. We emphasized the necessity to pursue well coordinated economic policies that are consistent with sound public finances; price stability; stable, efficient and resilient financial systems; employment creation; and poverty reduction. Countries who have the capacity should expand domestic sources of growth. This would help cushion a decline in demand from countries that should boost savings and reduce fiscal deficits.

3. Our Framework for Strong, Sustainable and Balanced Growth for the global economy is a key mechanism through which we will continue to work together to address the challenges associated with achieving a durable recovery and our shared objectives. In accordance with our timetable set out in St Andrews, we have conducted, with support from the IMF and World Bank, the initial phase of our cooperative and consultative mutual assessment process for the Framework by sharing our national and regional policy frameworks, programs and projections, assessing their collective consistency with our objectives, and producing a forward-looking assessment of global economic prospects. We further provided guidance to the IMF, and other international organizations, to assist us in assessing collective implications of national policies that could improve our global economic prospects and bring us closer to our shared objectives. For this purpose, we have agreed on principles to direct the development of alternative policy scenarios and have further elaborated the objectives of strong, sustainable and balanced growth as outlined in the Annex to this Communiqué. Drawing on these inputs we will deliver an initial set of policy options for consideration by our Leaders at the June 2010 Summit.

4. Recognizing the increasingly integrated nature of the financial regulatory reform issues, we reaffirmed our strong commitment to fully implement our reform agenda on the timelines agreed by Leaders in London and Pittsburgh. Good progress is being made and, to maintain the momentum, we:

• reaffirmed our reform is multi-faceted but at its core must be stronger capital standards, complemented by clear incentives to mitigate excessive risk-taking practices. We recommitted to developing by end-2010 internationally agreed rules to improve both the quantity and quality of bank capital and to discourage excessive leverage. These rules will be phased in as financial conditions improve and economic recovery is assured, with the aim of implementation by end-2012. Implementation of these new rules should be complemented by strong supervision. We stressed the importance of the quantitative and macroeconomic impact studies underway and look forward to an update on their progress by the FSB for our June meeting.
• agreed to closely review the progress of and provide guidance and strong support for the work of the FSB, BCBS and IMF. We support the work of the FSB to develop prudential standards, market infrastructures to contain the propagation of shocks and resolution tools and frameworks for systemically important financial institutions and look forward to a progress report for our meeting in June 2010. We look forward to receiving the IMF’s final report on the range of options that countries have adopted or are considering as to how the financial sector could make a fair and substantial contribution towards paying for any burdens associated with government interventions to repair the banking system. We call on the IMF for further work on options to ensure domestic financial institutions bear the burden of any extraordinary government interventions where they occur, address their excessive risk taking and help promote a level playing field, taking into consideration individual country’s circumstances. We welcomed the FSB, IMF and BCBS’s joint report on the inter-linkages between these issues and noted that, moving forward, we need to take into account the cumulative impact of the reforms on the financial system and the wider economy to move unequivocally in the direction of sound and stronger capital and liquidity framework ; and
• stressed the importance of achieving a single set of high quality, global accounting standards; implementing international standards with regard to compensation practices and welcomed the FSB’s report; completing the development of standards for central clearing and trading on exchanges or electronic platforms of all standardized over-the-counter derivative contracts, where appropriate, and reporting to trade repositories of all over-the-counter derivative contracts; and consistent and coordinated oversight of hedge funds and credit rating agencies. We welcomed the progress by the Financial Action Task Force in the fight against money laundering and terrorist financing, particularly regarding the issue of a public statement on jurisdictions with strategic deficiencies last February. We also welcomed the report by the Global Forum on Tax Transparency and Exchange of Information, the launch of the peer review process, and the development of a multilateral mechanism for information exchange which will be open to all countries. We welcomed the launch of the evaluation process by the FSB on the adherence to prudential information exchange and cooperation standards in all jurisdictions.

5. We noted the draft report on the scope of energy subsidies and suggestions for the implementation of the Pittsburgh commitment from the IEA, OPEC, OECD and World Bank. In accordance with country ownership and circumstances and recognizing the importance of providing those in need with essential energy services, we recommitted to prepare strategies and timetables for our meeting in June to rationalize and phase out, over the medium term, of inefficient fossil fuel subsidies that encourage wasteful consumption.

6. We urged progress to deliver on the representation and governance reforms of the International Financial Institutions agreed in Pittsburgh. We urged the IMF to deliver the quota and governance reforms by the November Seoul Summit. We look forward to an agreement on a package of voice reforms and World Bank financial resources, together with reforms to ensure effectiveness, at the upcoming Development Committee meeting. We will work towards ambitious IDA16 and African Development Fund replenishments. We welcomed the agreement in principle to increase the capital of the IaDB and EBRD and to adopt a robust reform agenda and look forward to the conclusion of discussions on general capital increase of the African Development Bank. We agreed to support full relief of Haiti’s debt by all IFIs, including through burden sharing, and welcomed the agreement at the IaDB and World Bank to relieve its debt and the establishment of the Haiti Reconstruction Fund.

7. We acknowledged the progress achieved by the Financial Inclusion Experts Group and look forward to the successful launch of the ‘SME Finance Challenge’. We welcomed the work of the Financial Safety Nets Experts Group and agreed to look at policy options to improve global financial safety nets, based on sound incentives, to better assist countries to deal with volatility in global capital flows. Inefficient markets and excess volatility in commodity prices more generally negatively affect both producers and consumers. We will finalize our work to address excessive commodity price volatility by improving the functioning and transparency of physical and financial markets in both producing and consuming countries.

8. We agreed to meet again on June 4-5 2010 in Busan, Republic of Korea, to prepare for the June Leaders’ Summit in Toronto, Canada.

The G-20 Framework for Strong, Sustainable and Balanced Growth

The primary goal of the Framework is to encourage G20 countries to implement coherent medium-term policy frameworks to attain a mutually beneficial growth path and avoid future crises. While G20 countries should adopt policy frameworks that are appropriate to their individual circumstances, there are clear benefits to collective action to achieve this goal. Such an approach would also raise living standards in emerging markets and developing countries.
Given that it may take several years to realise the benefits of many policy reforms, G20 countries should consider initiating actions now to attain stronger, and more balanced and sustainable growth over the medium term. Policy frameworks should be forward looking to guide expectations and to be sufficiently flexible to manage potential risks and facilitate adjustment to shocks so that strong, sustainable and balanced growth can be maintained.
The objectives of strong, sustainable and balanced growth are closely related and need to be pursued in a way that is mutually reinforcing.
Strong growth should
a. Close current output and employment gaps in G20 countries as soon as possible,
b. Converge to the growth rate of potential output over the medium term, and
c. Be enhanced over the long term by increasing potential output growth, primarily by efficiently utilizing available resources through the implementation of more effective structural policies.
Sustainable growth should be:
a. In line with underlying potential growth over the medium term, thereby providing a firm basis for long term growth,
b. Based on sustainable public finances and price and financial stability,
c. Resilient to economic and financial shocks,
d. Determined primarily by competitive market forces, and
e. Consistent with social and environmental policy goals.
Balanced growth should:
a. Be broadly based across all G20 countries and regions of the world,
b. Not generate persistent and destabilizing internal or external imbalances, and
c. Consistent with broad development goals, in particular, convergence to high standards of living across countries in the long run.
In providing this support to the G-20, the Fund should be informed by the general principles to which G-20 Leaders agreed last year in Pittsburgh (http://www.pittsburghsummit.gov/mediacenter/129639.htm). In addition to this context, the Fund should be guided by the following principles in developing the alternative policy scenarios:
1. The Fund should present a limited number of alternative policy scenarios to Deputies (i.e., no more than 3-4);
2. All scenarios must include policies aimed at ensuring a collective outcome that brings the G-20 closer to its shared objectives as laid out above;
3. All scenarios must demonstrate a shared contribution to adjustment and reform across the G-20 and that the mutual benefits of strong, sustainable and balanced growth should be broadly shared, taking into account the different stages of development for countries as well as the spillover effects across G-20 and non G-20 countries;
4. The Fund should consider the specific and feasible fiscal, monetary, structural and financial sector policy actions necessary to achieve our overarching objectives of strong, sustainable and balanced growth over the medium term;
5. The broad social, environmental and development impacts of the proposed policy recommendations in the scenarios should be considered;
6. The policy scenarios should consider the choices between the pace of implementing policy actions and their feasibility, credibility and effectiveness. As well, consideration should be given to the choices of raising global growth and of achieving more sustainable and balanced growth;
7. Given that it may take several years to realise the benefits of many policy reforms, the scenarios should consider the actions that can be taken now to attain stronger, and more balanced and sustainable growth over the medium term;
8. Policy actions for June should be expressed as actions for groups of countries facing similar circumstances, and regional economic institutions where appropriate, taking into account different national and regional economic structures and policy frameworks; and
9. The Fund should closely consult with G-20 countries throughout the process when assessing the sustainability and stability of an individual country’s macroeconomic policy.
In adopting these principles, the Fund’s report on alternative policy scenarios should clearly describe the global effects of adjustment, as well as the implications for member countries across a spectrum of indicators.
We will ask the World Bank to advise us on progress in promoting development and poverty reduction as part of rebalancing of global growth.
We also look forward to contributions from other international organizations, including the FSB on financial policies, the ILO on labor market policies, the WTO on trade policies, and the OECD and UNCTAD where appropriate.

1.         We, the G20 Finance Ministers and Central Bank Governors, met at a critical point in the recovery from the crisis to deliver the work remitted to us at Pittsburgh.

2.         Economic and financial conditions have improved following our coordinated response to the crisis. However, the recovery is uneven and remains dependent on policy support, and high unemployment is a major concern. To restore the global economy and financial system to health, we agreed to maintain support for the recovery until it is assured.

3.         To underscore our new approach to economic cooperation, we launched the G20 Framework for Strong, Sustainable and Balanced Growth, adopted a detailed timetable and initiated a new consultative mutual assessment process to evaluate whether our policies will collectively deliver our agreed objectives. We will be assisted in our assessment by IMF and World Bank analyses and the input of other international organisations as appropriate, including the FSB, OECD, MDBs, ILO, WTO and UNCTAD. We agreed a compact:

• to set out our national and regional policy frameworks, programmes and projections by the end of January 2010;
• to conduct the initial phase of our cooperative mutual assessment process, supported by IMF and World Bank analyses, of the collective consistency of our national and regional policies with our shared objectives, taking into account our institutional arrangements, in April 2010;
• to develop a basket of policy options to deliver those objectives, for Leaders to consider at their next Summit in June 2010; and,
• to refine our mutual assessment and develop more specific policy recommendations for Leaders at their Summit in November 2010.

4.         Our first challenge in using the Framework will be the transition from crisis response to stronger, more sustainable and balanced growth, consistent with our goals of sustainable public finances; price stability; stable, efficient and resilient financial systems; employment creation; and poverty reduction. While we will continue to provide support for the economy until the recovery is secured, we also commit to develop further our strategies for managing the withdrawal from our extraordinary macroeconomic and financial support measures. We agreed to cooperate and coordinate, taking into account any spillovers caused by our strategies, and consulting and sharing information where possible. To ensure credibility, our plans will be based on prudent assumptions and communicated promptly and transparently. We agreed to implement our plans flexibly, taking full account of variations in the pace of economic recovery and market conditions across countries and regions, and the complex interactions between different policy areas. The IMF and FSB will continue to assist us in reviewing strategies and implementation, identifying areas where coordination is particularly important and providing assessments of their collective impact on the global economy and the financial system. We welcome the work of the IMF and FSB to develop principles for exit.

5.         The International Financial Institutions (IFIs) will play an important role in supporting our work to secure sustainable growth, stability, job creation, development and poverty reduction. It is therefore critical that we continue to increase their relevance, responsiveness, effectiveness and legitimacy. To this end, we reaffirmed our commitment to: deliver the representation and governance reforms agreed in Pittsburgh and reiterated the deadlines of the 2010 Spring Meetings for the World Bank and January 2011 for the IMF; complete the 2008 quota and voice reforms; complete the review of World Bank and RDB capital to ensure they have sufficient resources conditional on reforms to ensure effectiveness, by the first half of 2010; make progress on reviewing the mandate of the IMF; and, strengthen their capability to prevent and manage future crises. We look forward to the ambitious replenishment of IDA and the African Development Fund, and the work on exploring the benefits of an IDA crisis facility, and the work on the Stolen Assets Recovery Programme. We call on the IEA, OPEC, OECD and World Bank to produce a joint report for our next meeting on energy subsidies, and working with our Energy Ministers, we will prepare at that meeting implementation strategies and timeframes, based on our national circumstances, for rationalising and phasing out inefficient fossil fuel subsidies that encourage wasteful consumption, and for providing targeted assistance programmes. We call on the relevant institutions to finalise their work on ways to avoid excessive commodity price volatility and reaffirm our commitment to publish national data.

6.         To continue strengthening the global financial system we agreed to work with the FSB to maintain the momentum of our programme of reforms, and ensure their full, timely and consistent implementation and a level playing field, in particular:

• to strengthen prudential regulation, we emphasised the need for the Basel Committee to develop stronger standards by end-2010 to be phased in as financial conditions improve and the economic recovery is assured, with the aim of implementation by end-2012. We call on supervisors to ensure that banks retain, as needed, a greater proportion of their profits to build capital to support lending;
• to ensure that compensation policies and practices support financial stability and align with long-term value creation, we commit to incorporate urgently within our national frameworks the FSB standards, and call on firms to implement these sound compensation practices immediately. The FSB will start assessing implementation without delay and report back with further proposals, as required, by March 2010;
• we welcome the new IMF/BIS/FSB report on assessing the systemic importance of financial institutions, markets and instruments, and the FSB’s work to reduce the moral hazard posed by systemically important institutions. We call for the rapid development of internationally consistent, firm-specific recovery and resolution plans and tools by end-2010. We look forward to discussing at our next meeting the IMF’s review of options on how the financial sector could contribute to paying for burdens associated with government interventions to repair the banking system; and,
• we welcome progress by the Global Forum on tax transparency and exchange of information, and the possible use of a multilateral instrument. To continue tackling non-cooperative jurisdictions (NCJs), we welcome progress made and call on the Global Forum, FSB and FATF to complete their peer review processes, and to assess adherence to international standards. We call on the relevant international institutions to further develop incentives and countermeasures as appropriate, in line with the timescales agreed in Pittsburgh, including through publishing lists of NCJs, and review capacity-building mechanisms to support the efforts of developing countries.

7.         We committed to take action to tackle the threat of climate change and work towards an ambitious outcome in Copenhagen, within the objective, provisions and principles of the United Nations Framework Convention on Climate Change (UNFCCC). We discussed climate change financing options and ecognizin the need to increase significantly and urgently the scale and predictability of finance to implement an ambitious international agreement. Public finance can leverage significant private investment. Increasing the scope of carbon markets would depend on policy frameworks of developed and developing countries and on the depth of emission reductions on the part of developed countries. To deliver this financing, coordinated equitable, transparent and effective institutional arrangements will be needed. Coordination of support for country-led plans and reporting of this support should be ensured across all financing channels, multilateral, regional and bilateral. We discussed a range of options and, ecognizing that finance will play an important role in the delivery of the outcome at Copenhagen, we commit to take forward further work on climate change finance, to define financing options and institutional arrangements.

8.         We thanked our UK hosts for their presidency of the G20 this year and welcomed the Republic of Korea as chair in 2010. We have agreed that France will chair in 2011.