In Washington in 2008, the G20 committed to fundamental reform of the global financial system. The objectives were to correct the fault lines that led to the global crisis and to build safer, more resilient sources of finance to serve better the needs of the real economy. At that and subsequent summits, the G20 has called on the FSB to develop and coordinate a comprehensive framework of reforms. In recent years, there has been considerable progress on a wide range of fronts.

This letter reviews what remains to complete the job, and then outlines the characteristics of financial supervision and regulation needed to realise fully the benefits of an open, integrated global financial system. The continued support of G20 Ministers and Governors will be critical to ensure that we don't just fix past fault lines but build a system that can evolve with the global economy to support strong, sustainable and balanced growth across the G20. It makes two main points:

First, if we remain focused and ambitious, we can complete the remaining core elements of the reforms during the Australian G20 Presidency. That programme, agreed by G20 Leaders at the St. Petersburg Summit, has four elements:

  •  Building resilience of financial institutions
  •  Ending too-big-to-fail
  •  Transforming shadow banking to transparent and resilient market-based financing
  •  Making derivatives markets safer

Second, the G20's approach beyond the Brisbane Summit will determine the openness of the global financial system and consequently the strength and sustainability of global growth. To realise fully the benefits of an open system, the FSB recommends that the G20 commit to an approach characterised by:

  •  Global standards for the resolution of global systemically important institutions to ensure that failures of cross-border institutions will be handled fairly, predictably and smoothly;
  •  Deferring to each other's market regulatory regimes where they achieve equivalent outcomes;
  •  Peer reviews and impact assessments to ensure consistent implementation when we get standards right and refinement of standards when we get them wrong; and
  •  Enhanced co-operation to avoid domestic measures that fragment the global system.

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