G-20-Part II

This is the second and concluding part of the article, first published on 21st May.

The previous article dealt with the origin and purpose of the formation of the G-20.   In this article, we shall examine the scope and extent of the mandate of the G-20, and how far it has been successful, in general,  in playing this role.

Mandate:  The G-20 is essentially, a informal forum for discussion, debate, and eventual resolution of issues relating to the global economy.   To bring about international co-operation, especially between the developed and the developing economies, takes up a lot of time and effort of the G-20.    A partnership between these two groups is not only ideal, but also essential for their  survival in this inter-dependent world.   The best evidence of this is perhaps, how the American economic crisis spread through a large part of the world, and caught other countries also in its trap.

The scope of the mandate of the G-20 can be guaged from the fact that, it’s member countries represent about two thirds of the world’s population.   Further the G-20 member countries represent nearly 80% of world trade and 90% of the global gross national product.   No doubt it enjoys considerable clout in matters related to the global economy and financial system.

Whether it is a matter relating to cross-border trade, or the management and the policies of international financial institutions, the G-20 plays an important and proactive role, to sort out the issues, to the satisfaction of all concerned.   The G-20 has institutionalized the process of resolution mechanism through dialog between the developed and developing world, for mutual benefit.

Achievements of the G-20:  The following are some of the major achievements of the G-20.

Promoting international co-operation:  This is a definite highlight in the achievement list of the G-20.   International co-operation in economic and financial matters sponsored and promoted by the G-20 is responsible for resolution of many a ticklish issue with global ramifications.

Promoting international fiscal standards:  The G-20 can claim responsibility for promoting international standards with regard to fiscal policies, the misuse of the financial system, etc.   It has brought about more transparency in the functioning of the international financial institutions, and made them more sensitive to the needs of the developing world.   International financial institutions are now more aware of the sensitivities of the developing world.

Fighting money laundering:  The G-20 has formulated specific standards against the practice of money laundering in association with other regulatory authorities.   It has come out with guidelines in regard to tax havens, that encourage money laundering.

Fighting financing of terrorism:  This is another area where the G-20 has made definite contributions.

These are some of the major achievements of the G-20.   In the coming years, it is expected to play an even more proactive role in global economic and financial matters.

                                                                                                                    Concluded.

 

The G-20-Part I

Introduction:  The G-20, or the Group of 20, is a group of both developed and developing countries, that play an important role in international economic and financial matters, and are hence considered to be systemically important at the global level.

The member countries of the group are Argentina, Australia, Brazil, Canada, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States of America, and the European Union.   The member countries are represented by their Finance Ministers and Governors of their Central Banks.   Apart from these countries, the International Monetary Fund and the World Bank are also represented in the group, on ex-officio basis.   The G-20 does not have a permanent Secretariat.

Origin:  The G-20 came into being in the year 1999.   The late nineteens saw a lot of turbulence in the financial markets of the world(that has now assumed the dimensions of a full blown recession).   It was felt, at the time, by the industrialized nations, that the earlier exclusive groups like the G-7 may not be sufficient to deal with the myriad challenges thrown up by the chaotic markets.   They then decided, albeit grudgingly, to give more scope for the developing world to play a role in discussing and debating key issues relating to the global economy.

Purpose of G-20:  The basic purpose of the G-20 is to promote and accelerate the process of development throughout the world, through a process of dialog and discussion between the industrialized world, and the emerging market economies.

The G-20 seeks to strengthen the international financial structures and frameworks through co-operation between the developed and the developing economies, and to institutionalize this process to ensure long term growth and development.   It gives voice to the less developed and emerging market economies, about their aspirations and concerns.

The G-20 seeks to understand the dynamics of an integrated global economy, and the problems and prospects of individual components of this global economy, and how to ensure a peaceful and profitable partnership betweeen these often competing forces.  

Many a time the interests of the developed and the developing economies are divergent and even conflicting with each other.   The G-20 forum promotes a dialog to resolve such issues, so that the process of development extends through the length and breath of the world.  

Historically, the marginalization of the developing world in the process of global economic governance, and the appropriation of the levers of development by the developed world led to the alienation of a good chunk of the world population.   This in turn led to the developed economies losing out on the opportunities in the emerging markets.

By seeking to include the developing economies in the formulation of international economic and financial policies, and also in the role of international financial institutions, the G-20 hopes to reduce, if not eliminate, friction between the developing and the developed world, and replace it with co-operation between the two sides.

                                                                                                              To be concluded.

G-20 Commitment to Developing World-Part II

This is the second and concluding article on the financial commitments made by the G-20, at their London Meeting on the 20d of April, to counter the effects of the global economic crisis.

The G-20 agreed to support the Multilateral Development Banks in the following ways:

1. To increase lending to low income countries, to the tune of USD 300.00 billion, an increase of USD 200.00 billion, over the existing limits.
2. To increase the capacity of the MDBs, so that it results in enhancing their own capacity to increase lending to to meet the growing demands.
3. The Asian Development Bank (ADB) would get a shot of capital infusion at 200% over and above the existing capital.
4. A similar need for increase in the capital requirements of other MDBs, such as the African Development Bank, and the European Bank for Reconstruction and Development would be reviewed, and a decision taken accordingly.
5. The G-20 would support efforts of the MDBs to leverage private capital through deployment of guarantees, bond insurance, and bridging finance.
6. To provide a sum of USD 250.00 billion in trade finance in the next two years.   This would be achieved through a combination of the International Finance Corporation program of Global Trade Liquidity Pool, and private sector financing.  Further, the G-20 members would voluntarily contribute 3to 4 billion to the IFC pool.
7. Export credit and Investment agencies would be roped in to provide tade financing, project financing, etc.,  working in concert with the MDBs.

The G-20 expressed its confidence in the ability of the International Financial Institutions(IFIs) to tackle the current crisis, and also to meet the needs of the emerging markets and developing countries.

Some of the major steps initiated/to be initiated by the IFIs to counter the threat of the ongoing global economic and financial crisis, and which has the support of the G-20 are:

1. The IMF has launched a new and more flexible financing option called the Fexible Credit Line, meant for countries with strong fundamentals, and policies, and also a track record of implementing  such policies.   It is a renewable credit line, with no ongoing conditins, and a longer repayment period.   Mexico is among the first countries to avail of this facility.
2. The IMF would address the issue of countries’ Balance of Payments financing needs, and the underlying causes of it.   Of special concern would be the withdrawal of external capital flows to the Banking and Corporate sectors.
3. The programs initiated by the the IFIs  viz. Vulnerability Framework, Infrastructure Crisis Facility and Rapid Social Response Fund would get practical support from the G-20 members by way of volunatry contributions.
4. The present lending limits for individual countries, by the World Bank, would be increased, to enable the larger countries access more funds, as per their requirements.   This would contribute to the stability and recovery in the respective countries.
5. Many low income IDA (International Development Assistance) countries that have sustainable debt positions, and also sound economic and financial policies, are facing problems on account of loss of access to capital markets.   Such countries should be given temporary access to non-concessional lending of the IBRD.

The G-20 called upon the IFIs to cooperate and coordinate with each other, in their developmental activities, for better results.   Further, the developing countries, including the poorest of them, must have more say in the functioning of the IFIs.

It remains to be seen how many of the above resolutions of the G-20 would be actually implemented, and how many of such implemented resolutions would beget the intended results.

                                                                                                 Concluded

G-20 Commitment to Developing World-Part I

This is the first in a two part series of articles on the financial commitments made by the G-20, to the emerging markets and developing economies, in their meeting, in London, on the 2nd of April, in the wake of the global economic crisis.

The G-20 leaders met on the 2nd of April to chart out a course of action, to save the world as it were, from the economic and fnancial crisis that is gripping it, and threatens the established world order.

One of the significant steps taken by the G-20 leaders, was the actual commitment to fund various developmental activities in the emerging markets, and developing countries, to counter the effects of the economic crisis in which the poorer nations are more at risk.

However, it should be noted that the question of individual contributions of the G-20 members, to the overall funding, was not spelt out in their meeting.   How much money would be made available to the international financial institutions, and other such developmental institutions, by each member is not clear.

The G-20 resolved:

1. To support and protect the economies of the emerging markets, and developing countries, by ensuring free flow of capital to them.
2. To provide necessary funding in the order of USD 850.00 billion to the International Financial Institutions (IFIs), to carry out the above task.
3. The IFIs would promote counter-cyclical funding to increase demand and spur growth.
4. Banks would be recapitalized to address the issue of risk management and prudential regulation.
5. Infrastructure would receive priority, as it is the base for developmental process.
6. To enhance world trade by providing funds for trade financing.
7. To provide Balance of Payment support to countries that are facing the problem of depletion of foreign exchange resources.
8. Debt rollover would be another measure to be encouraged to provide relief to countries unable to service their debts in time.
9. To ensure adequate funding to countries for various developmental activities, so that they do not divert funds from important social support activities related to health, education, etc.

In order to achieve the above goals, the G-20 has made financial commitments to International Financial Institutions, like the IMF and the World Bank, which in turn, would carry out the mandate of the G-20 in this regard.  

The following is a list of the financial commitments made by the G-20:

1. To make immediate contribution to the tune of USD 250.00 billion to the IMF, by the G-20 member countries.
2. To pump in an additional USD 250.00 billion, through the New Arrangements to Borrow, and to club the entire amount of USD 500.00 billion under this new program.
3. If necessary, the IMF would resort to market borrowing, to raise resources necessary to meet the demands.   This would be in addition to the existing programs of resource mobilization underway.
4. Concessional lending to low income countries through the IMF would be doubled from the present level.
5. Another source of funds would be the sale of IMF gold, which is expected to fetch, together with surplus income, an amount of USD 6.00 billion.   This money would go to support the poorest of the countries.
6. In order to increase global liquidity, an amount of USD 250.00 billion would be allocated through the mechanism of Special Drawing Rights.
7. Of the above amount of USD 250.00 billion, USD 100.00 billion would be allocated to emerging markets and developing countries.
8. The Fourth Amendment to the IMF charter would be expeditiously ratified, that would ensure a equitable distribution of the SDRs among member countries.
9. The next quota review would be completed by January 2011, in order to sustain the IMFs ability to meet the growing needs for financing, especially from emerging markets and developing countries.

                                                                                             To be concluded

The G-20 Prescription for a Strong Financial System-Part V

This is the fifth and concluding part of the series of articles on the outcome of the G20 Meeting in London, on 2nd April, 2009 to tackle the challenge of the current global economic crisis.

In this concluding article on the above subject, we examine the sixth and seventh reforms adopted by the G-20 to achieve the goal of bringing financial stability around the world.

Accounting Standards:  The G-20 committed itself to improve accounting standards for the financial institutions.   Valuation of financial instruments would henceforth reflect their liquidity, i.e., the ease with which the investor could encash them;   the investors’ holding horizon, that is, the period of investment in various instruments etc., apart from the existing system of fair value accounting.

The G-20 agreed upon the following steps to be taken in order to imporve accounting standards.

1. To simplify accounting procedures for financial instruments.   The unnecessarily complicated accounting procedures adopted for various instruments, for example, financial derivatives, need to be simplified.
2. Provisioning norms for loan-loss items to be strengthened, by taking cognizance of additional information, relevant to the process.
3. To improve accounting standards for provisioning for loans.
4. To improve accounting standards for off balance sheet items like interest rate swaps, options etc.
5. To address the issue of valuation uncertainty while setting accounting standards.
6. To bring about clarity and consistency in the application of valuation standards, at the goobal level, in co-operation with the concerned supervisory authorities.
7. To move towards one set of global accounting standards, that would help achieve the goal of improving accounting standards.
8. To promote the involvement of stakeholders, apart from prudential regulators, and emerging markets in the accounting standards setting process, to the extent possible, to bring about more transparency to the process.   To this end , the International Accounting Standards Board constitution would be reviewed to accomodate the above reforms.

Credit Rating Agencies:  This is the final reform adopted by the G-20 meeting in London to strengthen the financial system, to bring about its stability, and prevent the crisis situation now faced, that threatens to tear apart the global financial system.

The G-20, perhaps,  felt that the Credit Rating Agencies shoud be subject to more regulation, in view of the fact that many of the Banks and that fell by the wayside, in fact, enjoyed good credit rating.   In order to address this issue, the G-20 resolved that:

1. Credit Rating Agencies, being market participants, must be subject to proper oversight.
2. Credit Rating Agencies, whose ratings of Banks andFinancial Institutions are relied upon, by the regulators, would have to register themselves with the authorities, and would be subject to regulatory oversight.
3. This process would be consistent with the Code of Conduct Fundamentals of the International Organization of Securities Commissions(IOSCO).
4. The IOSCO would be the co-ordinating agency for compliance of the above reform.
5. The quality of the rating process would be improved by ensuring that such rating agencies adhere to a code of conduct, in regard to the issue of conflict of interest.   The rating process of the rating agencies should be transparent, and regulatory authorities should ensure the same, by taking necessary steps.
6. Credit Rating Agencies should be more forthcoming and transparent in respect of their rating process of structured products, and disclose their own track record of such ratings.   They should also disclose the underlying information and details, on which they relied in giving the rating.
7. The oversight regime across jurisdictions must be consistent and provide for sharing of information between them.
8. The Basel Committee should address the issue of external ratings in prudential regulations, and take appropriate steps in this regard.

                                                                                                      Concluded

The G-20 Prescription for a Strong Financial System-Part IV

This is the fourth in a series of articles, on the outcome of the G-20 Heads of State meeting, in London, on 2nd April, about ways to strengthen the financial system, in the wake of the global economic crisis.

In this article, we shall examine the fourth and the fifth reforms adopted by the G-20, to achieve the goal of a strong global and national financial system.

Compensation:  Long term goals of the company, and prudent risk taking, are the new criteria for fixing corporate compensation, as propounded by the G-20.   The Basel Committee on Banking Supervision is expected to include the rules regarding corporate compensation as part of the risk management guidance.

The principles on which corporate compensation plans would be based are:

1. The Board of Directors of the company should play an active role in fixing remuneration.
2. Compensation schemes should reflect risk taken.
3. Compensation should relate to the period of such risk taking.
4. Companies to be transparent about compensation schemes.   Stakeholders of the company must have opportunity to evaluate and monitor compensation schemems.
5. Compensation schemes of companies would come under the purview of the surpervisory authorities.
6. If necessary, supervisors may even require increased capital whenever compensation is found to be higher than normally acceptable as per the norms.

Tax Havens and Non Co-operative Jurisdictions:  Tax havens and non co-perative jurisdictions have come in for special attention of the G-20, on account of the grave danger posed by them to the financial stability.   The G-20 has called upon all jurisdictions to strictly follow the international standards in prudential, tax, and Anti Money Laundering and Combating of financing of Terrorism.   In order to achieve this, the concerned institutions are required to conduct and strengthen peer reviews as per norms.

The United Nations Model Tax Convention should be adopted by all the countries in regard to information exchange to facilitate compliance of the applicable tax regime.   Countries that do not meet international standards in relation to tax transparency, would be targetted for appropriate action.   Some of the proposed such actions are:

1. Transactions involving non co-operative jurisdictions would be subject to enhanced disclosure norms.
2. Taxes in respect of payments not to be reimbursed to non co-operative jurisdictions.
3. Residents of non co-operative jurisdictions to be denied tax deductions in respect of expense payments, to which others would be entitled.
4. Tax treaty policies between non co-operative jurisdictions and others to be reviewed for suitable corrective action.
5. International Institutions and Regional Development Banks to be advised to review their investment policies such that they do not favor non co-operative jurisdictions.
6. Bilateral aid programs would attract povisions of tax transparency, and compliance on part of the donee nations to be rewarded.

Apart from the above steps, the G-20 would consider further steps in this direction, aimed at reforming the non co-operative jurisdictions.   Developing countries would be encouraged and helped to avail benefits of new co-operative tax environment by end of this year(2009).

The G-20 committed itself to adhere to the international prudential regulatory and supervisory standards.   The International Monetary Fund and the Financial Services Board are charged with the responsibility of assessing the progess of the implementation of these measures in various jurisdictions.   

The Financial Services Board has been instructed to develop systems and procedures, to promote adherence to prudential standards and co-operation with various jurisdictions.

Compliance of the AML/CFT standards by various jurisdictions would be done by the Financial Action Task Force, who would also revise and reinvigorate the review process for assessing compliance of these norms.

                                                                                               To be concluded

The G-20 Prescription for a Strong Financial System-Part III

This is the third in a series of articles on the outcome of the meeting of the G-20 Heads of State on the 2nd of April, held in London, to come up with an appropriate response to the global economic crisis.

In the previous article, we had examined the third reform adopted by the G-20, namely, Prudential Regulation.   In this article we shall study the scope of this regulation.

Scope of Prudential Regulation:  The G-20 agreed for the need for regulation and oversight of systemically important financial institutions, markets, and instruments, with a view to bring stability to the financial system.

In view of the fact that the failure of some of the big Banks in the West led to the near collapse of the financial system, and also the role of complex financial instruments, like derivatives in the Bank failures, has, persuaded the G-20 to take a critical view of them and put them to scrutiny.

Some of the specific steps initiated/to be initiated by the G-20 in this regard are:

1)  To control the build up of systemic risks.   This is sought to be achieved by amending the regulatory system and empowering the concerned authorities to identify and assess the macro-prudential risks covering the entire gamut of the financial system, comprising of regulated Banks, Shadow Banks ( the set of financial institutions operating outside the purview of sovereign regulatory authorities), Private pools of capital like infrastructure funds, venture capital funds etc.

The G-20 has mandated the Financial Services Board to develop macro-prudential tools for the above purpose, in association with the Bank for International Settlements, and other international standard setters for the financial system.

2)  The biggies of the financial world, engaged in big time financing,  and also having a penchant for complex insturments of financing, would come in for special attention, as their failure can have a devastating effect across the system, as witnessed in the recent past.

3)  To pass enabling legislation to empower national regulators, to collect relevant information on all the systemcially important financial institutions, markets, and instruments in order to map out their potential for failure, and contribution to systemic risk.   Linkages will be established at the international level, to bring about consistency across national borders.

4)  The International Monetary Fund and the Financial Services Board are expected to come up with guidelines, which would help national regulators to identify, through a process of assessment, the systemically important institutions, markets, and insturments.   This, in turn, would help prevent regulatory arbitrage, the practice of taking advantage of jurisdictions having lesser regulation and oversight of the financial system, in general.

The emphasis in the above assessment would be, on the actual activities of the target group, rather than their legal form.

5)  To bring hedge funds/their managers under the purview of dspecial assessment terms to ensure the following:

1. Hedge funds would be registered.
2. They would be subject to disclosure norms, relating to all such areas that can contribute to an increase in systrmic risks across the board.
3. Every hedge fund to have a minimum prescribed size.
4. Adequate risk management mechanism would be put in place.
5. Where the hedge fund, and the fund manager, are based in two different jurisdictions, it would be ensured that information exchange and co-operation between the concerned authorities in the two jurisdictions is established and functioning.
6. The above process is expected to be completed by the end of this year (2009).

6)  Not only hedge funds would be required to have appropriate risk management tools for the purpose, but the institutions that have hedge funds as their counter-parties, would also be required to have an effective system of risk management.   In this regard, the leverage of the hedge fund, that is, the counter party, mst be monitored and limits must be set for single counter party exposures.

7)  The credit derivatives market, whose failure is one of the reasons for the current crisis, would be subject to better regulation and supervision, with the aim of making the market more resilient through standardization.   Central clearing conterparts(a central clearing house for derivatives)  would be established for the purpose.

8)  The G-20 also resolved to review and adapt the extent and application of the regulatory framework, in sync with the developments taking place in the finaqncial system, and to promote good practices and consistent approaches at the global level.

                                                                                          To be concluded

The G-20 Prescription for a strong Financial System-Part II

This is the second in a series of articles on the decisions taken by the G-20 in their meeting on the 2nd of April, in London, to strengthen the financial system.

In this article, we take a look at the second and third of the major reforms to be undertaken by the G-20 to achieve the goal of strengthening the financial system, both within the member countries, as well at the international level.

International Co-operation:  One of the significant reforms to be undertaken by the G-20 is to enhance international co-operation in the economic and financial fields, between countries, with a view to avoid the spillover of the after-effects of financial and economic distress, from one country to another.

The G-20 resolved to keep a close watch on various developments around the world, through international agencies, and to act swiftly and decisively, as and when danger signals are noticed.

In this regard, the G-20 agreed to:

1. To complete the process of setting up supervisory colleges for all the important cross-border firms by the June of 2009.
2. Where several countries have a stake in a major international financial institution, the authorities concerned, in all such countries, would be obliged to meet at least once in a year, and exchange information, and generally keep track of the health of the institution.
3. To help develop a framework for cross-border Bank resolution arrangements, to prevent domestic and international financial instability.   This is sought to be achieved through agencies like the International Monetary Fund, the World Bank, the Financial Services Board etc.
4. Exit strategies would be given due importance, to promote a healthy private sector.   Exit strategies would enable firms to exit the business before the total impairment of their capital.
5. The IMF and the FSB are expected to put in place an early warning system for economic problems, that would measure the impact of such problems on the economic and financial stability of the world at large.

Prudential Recognition:  In an effort to strengthen the financial system, the G-20 resolved to have a strong framework for prudential regulation, as discussed below.

1. The minimum level of capital required for International Financial Institutions to remain unchanged till the end of the current economic crisis.
2. In case any institution has capital over and above the required level, then it should be allowed to reduce the same, and utilize the funds for lending purposes.
3. Prudential regulatory standards to be strengthened in sync with economic recovery.  
4. The minimum capital requirement to be increased once the recovery phase gets underway.
5. A universal definition for the term ‘capital’ should be produced by the end of this year (2009).
6. The Basel Committe on Banking Supervision has been given the responsibility of recommending the minimum capital requirement in the year 2010.
7. The G-20 set a target date of the end of 2009 for implementation of its recommendations and decisions taken in the April 2nd meeting.   It has given this responsibility to the FSB, the BCBS, and the CGFS to complete this process, and to ensure that Banks build up a buffer above the minimum required capital, in times of boom, or economic revival, so that such buffer can be used in times of stress and need.
8. In order to prevent leverage opportunities in the Banking system, a combination of risk-based, and non-risk based capital requirement mechanism to be developed.
9. To provide incentives for risk management of securitization, including the possibility of allowing due diligence quantitative requirements by 2010.
10. All the G-20 members to adopt the Basel II capital requirements progressively.
11. To put in place, a mechanism, at the global level, to imporve the liquidity of financial institutions, including cross-border institutions.

                                                                                                      To be concluded

The G-20 Prescription for a strong Financial System-Part I

This article is a first in a series of articles on the decisions taken by the G-20 leaders, meeting on 2nd April in London, to strengthen the financial system, both within their countries, as well as the international institutions, engaged in development work.

Key areas of reform: The key areas of reform of the financial system, from the G-20 point of view, relate to the proper regulation and supervision of the system.   To ensure transparency and accountability in the various policies and activities of the system.   To promote integrity in the operation of the system.  

And to enhance international cooperation in this area to avoid the spillover of the after effects of the policies and actions of one country on the others.

In order to accomplish the goals that they have set for themselves, the G-20 resolved to push through reforms, to improve the functioning of the financial system.   These reforms relate to the following areas.

Setting up of Financial Stability Board:  The present Financial Stability Forum, set up in 1999, to promote international financial stability through information exchange, and international co-operation in financial supervision and surveillance, would be upgraded, and mandated to play a greater role, and take on more responsibility to bring about financial stability, in its new avatar as the Financial Stability Board.   The job of the FSB would be to:

1.  Identify and examine the shortcomings and weaknesses of the financial system and to take corrective action to set right the same.
2. To initiate joint action of all the authorities responsible for maintaining financial stability by co-ordinating their activities, and to avoid any slip-ups that might lead to grave situations.
3. To keep track of market developments and advise regulatory authorities of the effects of such developments, so that they could initiate corrective action in time.
4. To come up with a code of best practices and to monitor its adherence by the players to ensure a level playing field, and to avoid complaints, and a free-for-all situation.
5. To work along with international standard setting bodies, towards a favorable outcome in regard to the stated priorities.   Further, to review the progress in achieving these goals.
6. To come up with guidelines for the setting up of and activities to be undertaken by supervisory colleges.   These are organizations, where regulators from different countries come together, to discuss how best to oversee individual institutions.
7. To identify systemically important cross-border firms, whose activities can have repercussions across borders, affecting the economic well-being of people across countries.   To monitor the activities of such firms from the regulatory and supervisory angle.
8. To manage any cross-border crisis, especially those arising out of the activities of the cross-border firms.   To provide necessary support to contingency planning aimed at dealing with such crises, as and when they occur.
9. To constantly monitor and assess the risk to the economic and financial system, on account of the various market developments, in association with the International Monetary Fund, and to report the same to the concerned authorities, like the G-20 Finance Ministers and Central Bank Governors.

The G-20 also agreed to open up the Financial Services Board to peer reviews to ensure compliance  of its mandate.   The key to financial stability being adherence to sound and internationally acceptable standards and practices.   Ensuring opennes and transparency in the operations of the Financial Services Board was also a committment made by the G-20, to achieve the goal of strengthening the financial system. 

                                                                                           To be concluded

 

The G-20 Response To The Global Economic Crisis-Part VI

This is the sixth and concluding article on the outcome of the Meeting of the G-20 Heads of State, in London, on the 2nd of April, to discuss the effects of the global economic crisis, and a suitable response to it.

Building an inclusive, green, and sustainable recovery:

The G-20 conceded an important point, that less developed countries have been lamenting about, for a long time-that the economic policies of the rich and the industrialized countries ignore the concerns of the poorer countries.

The G-20 recognized the fact that the current economic crisis has a more damaging effect on the poorest countries, that are practically defenceless, in dealing with the contagion of economic recession hitting them forcefully.

In order to meet these challenges, the G-20 resolved to do the following:

1. To fulfill their committments under various international conventions to fund activities related to promotion of trade, debt relief, etc.
2. To channel funds to the tune of USD 50.00 billion to low income, and developing countries, for the purpose of social protection, to increase trade, and safeguard development.   It is expected that by providing social protection under appropriate schemes, the problems of social unrest, violence, etc., can be contained.
3. To deploy necessary resources to the poorest countries to address the problems of food security and social crises.   Social security is a live and vital issue in several parts of the world that needs to be addressed, as it is a basic requirement.   Further, it is observed that several other efforts like educational initiatives, etc., recieve a setback on account of the food security issue.
4. To utilize the proceeds of the sale of the IMF gold, and surpluses in income to put together a concessional and flexible finance scheme of about USD 6.00 billion, to aid the poorest countries in their developmental efforts.   The IMF has been advised to place before the G-20, a viable and practical proposal in this regard.
5. To rejig programs of international aid and development, to make them more flexible and easier to access by the intended beneficiary countries.   The IMF and the World Bank have been advised to actively engage in this work.
6. To seek the active cooperation of the United Nations Organization, to establish a mechanism to monitor the effects of the economic crisis on the poorest of the countries, that are indeed more vulnerable to its impact.
7. The G-20 laid special emphasis on the human dimension of the current crisis, especially the impact on the poorest and most vulnerable sections of society.
8. Education and training, and job creation would be among the basic tasks to be undertaken to tackle the problems of economic deprivation.   In the long run, such investments would have a salutory effect in combating economic and social crises, especially in the poorer countries that are prone to such problems.   Involving multilateral and international agencies in this task would bring more competence and transparency to the job.
9. The G-20 committed itself to “building a resilient, sustainable, and green recovery”, through judicious utilization of funds meant for fiscal stimulus programs.
10. To move towards a cleaner and greener future, by promoting appropriate technologies that are innovative and environment-friendly.   To work in partnership with international institutions to establish sustainable economies.
11. The G-20 reaffirmed its committment to play a positive role in facing up to the problems of climate change, and its attendent consequences.

Finally, the G-20 committed itself to the realization of the various proposals and promises into tangible results.   It would pursue the various issues with sincerity and determination to take them to their logical conclusion.   A result-oriented approach would be undertaken to convert words into actions.

                                                                                                             Concluded

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