15 October 2011

Communiqué of Finance Ministers and Central Bank Governors of the G20

We, the G20 Finance Ministers and Central Bank Governors, met at a time of heightened tensions and significant downside risks for the global economy that need to be addressed decisively to restore confidence, financial stability and growth.

We have progressed in delivering the commitments we made three weeks ago in Washington DC. In particular, we welcome the adoption of the ambitious reform of the European economic governance. We also welcome the completion by euro area countries of the actions necessary to implement the decisions taken by euro area leaders on 21 July 2011 to increase the capacity and the flexibility of the EFSF. We look forward to further work to maximise the impact of the EFSF in order to avoid contagion, and to the outcome of the European Council on October 23 to address decisively the current challenges through a comprehensive plan. We made progress on our action plan of coordinated policies for consideration by our leaders at the Cannes Summit. This action plan will encompass a set of measures to address immediate vulnerabilities and strengthen the foundations for a strong, sustainable and balanced growth whereby:

• advanced economies, taking into account different national circumstances, will adopt policies to build confidence and support growth, and implement clear, credible and specific measures to achieve fiscal consolidation. Those with large current account surpluses will also implement policies to shift to growth based more on domestic demand. Those with large current account deficits will implement policies to increase national savings.
• Emerging market economies will adjust macro-economic policies, where needed, to maintain growth momentum in the face of downside risks, contain inflationary pressures and endeavour to enhance resilience in the face of volatile capital flows.
• Surplus emerging market economies will accelerate the implementation of structural reforms to rebalance demand towards more domestic consumption, supported by continued efforts to move towards more market-determined exchange rate systems and achieve greater exchange rate flexibility to reflect economic fundamentals.
• All countries will undertake further structural reforms to raise potential growth.
• In all of our actions we will strive to foster growth, job creation and promote social inclusion.

We remain committed to taking all necessary actions to preserve the stability of banking systems and financial markets. We will ensure that banks are adequately capitalised and have sufficient access to funding to deal with current risks. Central banks have recently taken decisive actions to this end and will continue to stand ready to provide liquidity to banks as required. Monetary policies will maintain price stability and continue to support economic recovery.

We reaffirmed our shared interest in a strong and stable international financial system, and our support for market-determined exchange rates. We reiterate that excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability.

We are more determined than ever to reform the financial sector to serve better the needs of our economies. We reaffirm our commitment to implement fully, consistently and in a non-discriminatory way agreed reforms on OTC derivatives, all Basel agreements on banking regulation within agreed timelines and reducing overreliance on external credit ratings. We endorsed a comprehensive framework to reduce the risks posed by SIFIs, including strengthened supervision, key attributes of effective resolution regimes, a framework for cross-border cooperation and recovery and resolution planning, as well as additional loss absorbency requirements for those banks determined as G-SIFIs. Now that the framework applicable to GSIFIs is agreed, we urge the FSB to define the modalities to extend expeditiously the framework to all SIFIs. We agreed on initial recommendations and a work plan to strengthen regulation and oversight of shadow banking. We welcomed the joint IMF-WB-FSB report on financial stability issues in emerging markets and developing economies; endorsed the FSB report and the common principles on financial consumer protection prepared by OECD with FSB and call for further work on implementation issues; endorsed the progress report of the FSB OTC derivatives working group to ensure proper coordination and sequencing, and agreed on the importance of the work to set margining standards on non-centrally cleared OTC derivatives; endorsed the IOSCO report on commodity derivatives markets and called IOSCO to report on implementation of its recommendations by end 2012. We endorsed first recommendations by IOSCO on market integrity and call for further work by mid-2012. We welcomed initial work by FSB-IMF-BIS on macroprudential policy and look forward to further work in 2012. We underscored our support for a global legal entity identifier system which uniquely identifies parties to financial transactions with an appropriate governance structure representing public interest. We reaffirmed our objective to achieve a single set of high quality global accounting standards. We look forward to discussion of progress made in tackling non‐cooperative jurisdictions and tax havens in Cannes. We underlined in particular the importance of comprehensive tax information exchange and encourage competent authorities to continue their work in the Global Forum to assess and better define the means to improve it. We agreed on a coordinated framework for monitoring implementation of our financial regulation agenda, including enhanced monitoring of Basel II, II-5 and III implementation, setting up a peer review council for GSIFI policies, a coordination group on OTC derivatives complementing the OTC derivatives working group, and an ongoing monitoring and public reporting on compensation practices focused on remaining gaps and impediments to full implementation of FSB standards and principles on compensation, and also reviewed a scoreboard to track progress for our Leaders. To ensure that the FSB keeps pace with our ambitious financial regulation agenda, we commit to strengthen its capacity, resources and governance building on its Chair’s preliminary proposals and call for first steps to be implemented by the end of this year.

Full communiqué

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