G20 Leaders Agree to Raise Financial Supervision

The leaders of the Group of 20 industrialized and emerging countries have agreed to beef up international cooperation to strengthen regulatory measures and supervision of financial markets.

In Washington Saturday, the leaders said in a joint declaration that they will draw up measures to stimulate domestic demand and increase fiscal spending to prevent the world economy from sliding deeper into crisis.

They also agreed to strengthen the transparency and accountability of businesses by enhancing required disclosures on complex financial products and ensuring complete and accurate disclosures by companies of their financial conditions.

Efforts will also seek to ensure that all financial markets, products and companies are regulated for sound risk management.

On bolstering the integrity of financial markets, the leaders also pledged to provide institutional mechanisms at the state level by protecting both investors and consumers and preventing illegal market manipulation.

They failed, however, to agree on coordinated interest rate cuts and the creation of a global financial watchdog, an idea proposed by European countries.

Instead, a decision was made to adopt global accounting standards by addressing the weaknesses of each country’s accounting standards and regulatory practices. Moreover, they decided to strengthen surveillance on large complex cross-border financial institutions by enhancing cooperation among financial regulators.

In light of the recent financial turmoil caused by a string of high-profile bankruptcies in the United States, the G20 leaders decided to review bankruptcy laws that permit an orderly wind down of large international financial companies on the heels of a crisis.

To implement the agreements made, the leaders drew up a detailed action plan to be implemented by the end of March. Another G20 summit will open in April to review the implementation of the agreements.

President Lee Myung-bak in his keynote speech said, “The problem with protectionism is that protectionism by one country triggers protectionism in other countries. As a result, economic conditions worsen for the whole world.” The first priority for us to address is ensuring adequate liquidity in all of our economies.”

“What we need now is to extend benefits of the short-term liquidity facility not only to emerging economies, but also to other developing countries not present in today`s meeting.”

swpark@donga.com