Presented by Jongryn Mo

2009. 4. 28

Presented by Jongryn Mo

2009. 4. 28

G20 and the Global Financial System

I. Background on the G20 London Summit

II. The Agenda and Results of the London Summit

III. The Significance of the London Summit

IV. The Prospects for G20 Summit

3

When did the G-20 begin?

The Asian currency crisis in 1997

Calls for a new consultative body for financial market stability

G-7 finance ministers agreed to create G-20 in September 1999

G-20 to represent both industrialized and emerging economies

The Group of Twenty (G-20) Finance Ministers and Central Bankers

The first G-20 Meeting was held in December 1999

4

G-20 Achievements

Exchange rate system

External debt

Globalization

Economic integration

Crisis Prevention · Managemen

t

(’99~’02)

General Economic

Issues

(’03~’07)

Crisis prevention

Debt workouts

Aging society

Sustainable growth

Finance ministers, not heads of states

Long-term issues, not current issues

5

Advanced and emerging economies needed to coordinate

Why the G-20 Summit?

Elevate the G-20 to the Summit Level → The First Summit met in Washington on November 15, 2008

Elevate the G-20 to the Summit Level → The First Summit met in Washington on November 15, 2008

The global spread of the financial

crisis

G-7+α?

G-14

G-13

G-20

6

Washington Summit (08.11.15)

MacroPolicy

Coordination

FinancialMarketreform

StrongerIMF

Anti-protectioni

sm

IMF Governance

Reform

First time advanced and emerging economies met to discuss joint

responses - Adopted agendas such as action plan for financial

market reform

Shared Concern on Global Economic Crisis

Joint policy response

7

London Summit (09.4.2)

MacroEconomic

PolicyCoordinatio

n

StrengthenFinancial

Regulation/Supervision

ExpandDevelopme

ntSupport

StopProtectionis

m

Overcome and Prevent Economic Crisis

The Third Summit to meet in 2009 : Implementation

8

London Summit (09.4.2)

$ 5 trillion in government spending in 2009-10 → 4% increase in GDP expected

IMF to assess national policy measures

FiscalStimulus

FightingProtection

Standstill reconfirmed, violations to be rectified

Reject financial protectionism

WTO publish quarterly lists of protectionist actions

9

London Summit (09.4.2)

Development

Support

Financial regulation/supervision

Expand and rename FSF to FSB

Financial institutions and products with system risk

List and regulate credit rating agencies

Sanctions against non-cooperative jurisdictions

Expanded assistance to developing countries: $1.1 trillion

IMF and development banks $850 billion

Trade finance $250 billion

Governance reform at IMF and development banks

10

The G-20 emerges as the central forum

Achieved concrete results beyond rhetoric

The lessons of the G-66 summit in 1933

G-20 showed it could replace G-7 as the central forum

G-20 to review and approve FSB discussion results

FSF·BCBS membership expanded, FSF converted into FSB

Sanctions against non-cooperative jurisdictions

The third summit to be held during 2009

11

About London Summit

“They managed to get more than I expected” – George Soros

“a very productive summit that will be a turning point in our pursuit of global economic recovery…… The London Summit was historic because of the size and the scope of the challenges that we face, and because of the timelines and magnitude of our response” – Barack Obama

“This is the day that the world came together, to fight back against the global recession. Not with wordsbut a plan for global recovery and for reform and with a clear timetable” – Gordon Brown

12

About London Summit

“I think I can say that in an important conference we have found a very good, almost historic compromise in a unique crisis. This time the world does not reactas in the 30s” - Angela Merkel

“I think a new world order is emerging with the foundationof a new progressive era of international co-operation”- Gordon Brown

“ The real historic significance of this moment may be the historic shift it marks – away from Western dominance to something bigger and more global” – BBC

13

Strengthening financial regulations and supervision

Agreed to strengthen financial regulations for crisis prevention

But the importance of conditions and economic dynamism is to be recognized

Prudential regulations to come after financial market stability is restored

Emphasize both strong regulations and open trade and investment regimes

14

Strengthening financial regulations and supervision

“Since Bretton Woods, the world has been living on a financial model, the Anglo-Saxon model – it’s not my place to criticise it, it has its advantages – clearly,today, a page has been turned” – Nicolas Sarkozy

“The regulators are now beginning for the first timeto cast an eye over financial remuneration. Global regulation is what is required given the global nature of the financial system” – Kevin Rudd

15

A global financial regulatory body?

FSF

FSB(Financial

Stability Board)

G-7

Swiss, Hong Kong

Global standards

and regulations

G-20

Swiss, HK

Spain·EC

Global standards/

regulations

&

New funding→ Development

support

Stronger monitoring/

early warning

Business cycle compatibilityMultinational

financial institutions

Early warnings

16

The Third Summit

Check the implementation of the London agreements

Reformation of financial regulations

Strengthening of FSB and IMF

Current economic issues at the time of the meeting

The second meeting theme: restoring confidence in financial markets

17

The Future of the G-20 System

Inclusiveness, Representation

G-20 = G-7 + Emerging economies + International Financial Organizations

79%3/2

2/3 of World's Populations 79% of Global GDP

18

’02 ’50

1bn 1bn

5bn

8bn

’02 ’50

PopulationEMEs’ Economic Weight in G20

AdvancedCountries EMEs

’02 ’50

17%

70%

* Source : Goldman Sachs

The Future of the G-20 System

Efficiency

Efficiency = Policy formulation + Policy implementation

Successful summits: London after the Washington Summit

Thank You!Thank You!