How Should the Group of 20 Deal with the Threat of Global Recession?

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As we navigate through the worst U.S. financial crisis since 1907, the U.S. economy will continue to contend with the threat of a global recession. There is an urgent need for coordination of national and international regulatory reforms - reforms that will strengthen the global regulatory system to prevent it from happening again.

President Bush will host the Nov. 15 Group of 20 summit with heads of state to assess the effectiveness of the international response to the current financial crisis and focus on policy coordination between countries to work on strengthening the global regulatory system. As an association that has discussed the need for regulatory reform for the last two years, the Financial Services Roundtable puts forth the following principles to serve as a compass for the journey forward.

We urge the G-20 heads of state to consider the following seven principles as the starting point for all subsequent international policy coordination.

1. Balance competitive markets and effective regulation - All nations should affirm the importance of competitive and innovative markets in meeting the financial needs of consumers and businesses. While recent market events have demonstrated a need for better, more effective regulation of financial markets and firms, excessive regulation can stifle innovation that benefits consumers and also hinder economic growth. Future policies need to strike an appropriate balance between competitive financial markets and effective regulation.

2. Create market stability regulator - Each nation should create a market stability regulator to monitor financial market developments, implement early warning systems and share information with their fellow regulators on a global scale. It is impossible to predict the velocity and exact path of financial storms, but possible to identify early warning signs. Having a single point of reference and responsibility for broad financial market developments - including crisis warning signs - within each country would be an important first step.

3. Adopt principles-based regulation and supervision - Each nation should adopt basic guiding principles to ensure effective regulation and uniform, prudential supervision. At a minimum, such principles should address consumer protection, fair competition and sound risk management. Based on an extensive review of a Blue Ribbon Commission chaired by James Dimon, chairman and chief executive officer of J. …