Members of the G20 need to take decisive action to raise global growth, reduce unemployment, enhance the global regulatory framework, and bolster financial stability, according to the Institute of International Finance (IIF).
This broad message was conveyed to the G20 in the IIF’s latest Policy Letter.
“We would like to bring to the attention of the G20 several important issues which, if not promptly addressed, would seriously hinder the global economy from exiting the financial crisis and attaining sustainable growth,” says Tim Adams, the Managing Director of the IIF.
One serious stumbling block is the current tendency towards increasingly fragmented financial regulation.
The IIF and its members are deeply troubled by this development. Although it has an understandable impetus – the protection by individual nations of their own financial services sectors and taxpayers against future global risk– this fragmentation tendency is threatening to undo decades of cross-border cooperation.
"This cooperation was of fundamental importance in driving global economic growth in the recent past," notes Adams. "If we fail to preserve the spirit – and the fact – of international harmonization of financial regulation, we run the risk of inhibiting the global economic regeneration so desperately needed by people everywhere.”
Accordingly, the G20 should re-double its commitment to the Financial Stability Board (FSB), as the coordinating body overseeing both the development and implementation of international financial regulatory policies.
The IIF considers that there is a growing need for the FSB to be empowered to resist unilateral or protectionist regulatory measures adopted by individual countries.
The IIF also urges the G20 to strengthen its policy coordination effort, continuing the progress already made by the London and Pittsburgh G20 Summits, to accelerate growth and avoid possible discord on exchange rates.
This risk has arisen as countries have relied more on monetary accommodation to stimulate growth. If they are announced and implemented in an uncoordinated way, these monetary easing actions could give rise to unhelpful currency volatility.
The IIF also urges the G20 to express support for the enhanced Principles for Stable Capital Flows and Fair Debt Restructuring, endorsed by the G20 in Berlin in 2004.
“All G20 members have a single interest at heart – the swift restoration of a growing global economy. For its part, the private financial community recognises its critical role in increasing the supply of bank credit to the real economy; it stands ready to work closely with the G20 and the official sector towards achieving our mutual goals of global financial stability and sustainable economic growth.”