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  • International monetary system reform remains focus of G20

International monetary system reform remains focus of G20

The G20 initiatives to reform the international monetary system and financial regulation have been presented at a briefing at the G20 International Media Centre.

Andrei Bokarev, Director of the Department of International Financial Relations at the Russian Ministry of Finance, spoke about the main results of the work on reforming the international financial architecture over the G20 Russia's Presidency.

One of the key issues he addressed was Russia's proposal to begin a discussion on debt sustainability and government borrowing and public debt management. "We set ourselves the goal of achieving results in specific areas," Bokarev said. "One of them was revising the Guidelines for Public Debt Management once issued by the IMF and the World Bank. A major effect of our work was the agreement reached at the Finance Ministers' level to launch the procedure for revising these guidelines. The first proposals on the new edition will be presented in October at the G20 Finance Ministers' Meeting, while the final version of the document should be approved in February-March 2014."

Supporting the development of local currency bond markets is another important area. One of the major milestones in this process came about during the Russian Presidency: action plans have been adopted and recommendations have been drafted for the development of the domestic bond markets, mainly in emerging countries, to stimulate additional investment in their economies.

Working out responsible borrowing practices is another significant issue: specific proposals, rules and recommendations need to be drafted, mainly for low-income countries to implement policies to attract loans.

Speaking of reforming the key international financial institutions - primarily the International Monetary Fund - Bokarev stated regretfully that this year the group had failed to achieve the expected results in this area due to a number of objective reasons. The IMF reform planned in compliance with the G20 Leaders' decisions taken in Seoul in 2010 has not been completed. This, in turn, hampers the preparation and approval of a new IMF quota formula, which would help factor in the interests and roles of emerging markets and increase their quotas. At the time, Bokarev expressed hope that some results and agreements would be reached before the Russian Presidency's end.

Svein Andersen, Secretary General of the Financial Stability Board, spoke of the main avenues of G20 work on the financial regulation reform. The main objectives here are to build a more stable banking system and eliminate the "too big to fail" problem (when the collapse of important financial institutions affects the whole system and poses a danger of serious economic damage). Other plans involve reducing the risks in shadow banking through developing appropriate regulatory policies, reforming the over-the-counter derivatives market and reducing dependence on rating agencies.

The G20 has made tangible progress in this respect, Andersen said. A package of specific policies and planned reforms has been worked out on each issue. These recommendations have been submitted for the G20 Leaders' consideration and approval during the Summit.

"Over the time that has elapsed since the beginning of the economic downturn, the G20 has worked hard to make the global financial system far more reliable than it used to be," he said. "Still it is important not to rest on what we have achieved. If the reform initiatives are approved by the leaders, they will help further improve the financial system's operation."