Abstract

The FSB Chair’s letter to the G20  Summit reports on progress in financial reforms and highlights the major issues for the attention of G20 Leaders. This letter takes stock of the progress over the past five years and outlines the major outstanding issues which demand the attention of Leaders.  It makes three main points:

  1. FSB members have made major progress correcting the fault lines that caused the crisis.  We are building more resilient financial institutions and more robust markets through substantially strengthened international standards.  We are addressing the problem of too-big-to-fail. We are working to prevent regulatory arbitrage, so that tightening regulation in one sector or region does not lead to risky activity migrating elsewhere. And we are building a framework for robust market-based finance so that markets will remain continuously open.
  2. Our work is not yet completed.  It is crucial that the G20 stay the course in implementing reforms in a consistent manner. More remains to be done to build the resilience of institutions. The G20 should also concentrate in particular on completion of three crucial areas of reform: ending too-big-to-fail; reforming shadow banking; and making derivatives markets safer. 
  3. The G20’s response will ultimately dictate the openness of the global system and consequently the strength and sustainability of global growth. Only the G20 can decide whether the necessary institutions and co-operative cross-border mechanisms are built in order to realise fully the benefits of an open, integrated and global financial system.  Strong, sustainable and balanced growth will not ultimately be achievable without such a system.