Meeting of Finance Ministers and Central Bank Governors in Paris

 

                                                                                                  

The G20 Finance Ministers and Central Bank Governors met in Paris on the 18th and 19th of February 2011. The main topic was to address ongoing economic and financial difficulties and to concur on a way forward to achieve the orders given. The ministers and governors have confirmed their commitment to manage policy action by all G20 members to accomplish powerful, sustainable and balanced development. Main priority actions involve carrying out fair term fiscal consolidation proposals modified according to national circumstances in line with Toronto commitment, searching for pertinent monetary policy, improving exchange rate flexibility to better reveal economic fundamentals and structural improvements, to assist global demand, enlarge potential growth, develop job creation and contribute to global rebalancing. Also, discussed progress made since the Seoul Summit and showed the need to diminish excessive imbalances and carry on present account stability at sustainable levels by intensifying multilateral cooperation.

               The leaders agreed on a set of measures that will allow us to focus, through an integrated two-step process, on those persistently huge imbalances which need policy actions. In order to complete the mandatory work for the basic step, their aim is to agree, by following meeting in April, on indicative guidelines against which each of these indicators will be evaluated, acknowledging the demand to take into account national or regional circumstances, including large supply producers. While not aims, these indicative guidelines will be employed to assess the following indicators: (i) public debt and fiscal deficits; and private savings rate and private debt (ii) and the external imbalance organized of the trade balance and net investment income flows and transfers, taking due deliberation of exchange rate, fiscal, monetary and other policies. Adopting a schedule for developing the 2011 action plan that will implement for Framework for Strong, Sustainable and Balanced Growth and look over the commitments that are already made, is another consent they reached. As approved in Seoul, IMF has been called on to distribute an assessment as part of the Mutual Assessment Process on development towards external sustainability and consistency of policies at the October meeting. At the moment, the leaders would make sure to review a report on the MAP including an action plan knowledgeable according to the examination on the root causes of continuously large imbalances based on the agreed guidelines.

                                 The leaders and governors at the meeting are looking forward to the completion by the next Leaders’ Summit of the following ongoing work on systemically important financial institutions as arranged in the FSB work program for 2011. For example, resolution of Global-systemically important financial institutions by FSB and national authorities based upon indicative standard; useful resolution scope including in a cross-border context; capital surcharges, contingent capital and bail-in instruments; and other supplementary requirements as determined by the national authorities including systemic levies. Once the frame initially applicable to G-SIFIs is agreed, the G20 Finance Ministers and Central Bank Governors will move promptly to cover all SIFIs. The 2 reports should be finalized by the BIS, IMF and FSB on macro-prudential frameworks and by the FSB, IMF and World Bank with input of national powers on financial stability matters in emerging market and developing economies by our October meeting. Not only that but also, the recommendations that the FSB will prepare by mid-2011 on regulation and oversight of the shadow banking system to efficiently address the risks, notably of arbitrage, associated with shadow banking and its interactions with the regulated banking system should be good to go. They also decided to call on the OECD, the FSB and other relevant international organizations to develop common principles on consumer protection in the field of financial services by our October meeting as well.

               The Group of 20 finance ministers and central bank governors meeting surely ended with a compromise on which major economic indicators to include in the “indicative guidelines.” A communiqué was released by setting their goal for the next meeting in April to agree on the guidelines being used to evaluate any indicators; public debt, fiscal deficits, and the private savings rate.

JiMin Park (parkjm0718@naver.com)