• IIF Urges G-20 to Recommit to Economic Regulatory Reforms in Upcoming Meetings
  • April 26, 2010
  • Law Firm: Alston & Bird LLP - Atlanta Office
  • Last week, in advance of the upcoming meetings of the Group of 20 (G-20) and the International Monetary and Financial Committee (IMFC) in Washington D.C. on April 22-23, the Institute of International Finance (IIF), a global association of financial institutions, issued a public statement urging G-20 finance ministers and central bank governors “to recommit to international coordination of economic policy and financial regulatory reform in order to secure economic recovery and strengthen the financial system.” In addition, the IIF called on G-20 officials to recommit to "reforming financial regulatory, supervisory, and accounting standards in order to lessen the risk of future financial crises, while preserving and reinforcing the financial sector’s contributions to investment, innovation, and job creation.”

    IIF Managing Director Charles Dallara also issued a policy letter to U.S. Treasury Secretary Geithner reiterating the IIF’s position and outlining critical issues that the IIF believes should be addressed at the upcoming G-20 meeting. The letter attributes the ongoing economic recovery “in large part to the cooperative response to the global financial crisis, orchestrated by the G-20 with crucial support from multilateral institutions.” But, despite recent extraordinary measures by central banks and governments to promote economic stability, there still remain “risks to the durability of the recovery,” which are “compounded by signs that the spirit of unity in addressing global challenges may be waning.” The letter urges G-20 leaders to adopt coordinated action in the following three areas:

    1. reform of regulatory, supervisory, and accounting standards frameworks;
    2. adoption of policy measures to achieve balanced global growth; and
    3. adoption of additional steps to strengthen the international financial institutions and “safeguard the open system of international trade and investment.”

    The letter also called upon the Financial Stability Board and the Basel Committee on Banking Supervision to intensify their efforts to “ensure that there is a coherent overall framework that ties together the key areas of regulatory reform.”

    On the issue of macroeconomic policy, the letter emphasizes that global policy coordination is necessary to promote the reduction of global imbalances while sustaining economic growth. While the letter acknowledges the success of the new G-20 Mutual Assessment Process, the IIF recommended that the G-20 consider establishing a coordinating body, referred to as a Global Macroeconomic Coordinating Council (GMCC), to “increase the chances of success in negotiating potentially-difficult tradeoffs among key players.” The GMCC would consist of leaders from countries that represent “systemically important mature and emerging market economies.”

    The IIF also issued a research note last weekend entitled “Capital Flows to Emerging Market Economies.” The report projects net private capital flows to emerging markets this year to total $708.6 billion, up from $530.8 billion in 2009, and it forecasts a volume of $746.4 billion in 2011. The IIF’s recent estimates for both 2010 and 2011 are slightly under the estimates it released in the beginning of 2010 (by $13 billion and $52 billion, respectively).