BUSAN, South Korea (AFP) – The world economy is recovering faster than expected but recent volatility in financial markets shows that “significant challenges” remain, Group of 20 finance ministers said Saturday.
After a two-day meeting overshadowed by the eurozone debt crisis, ministers said in a communique that recent events “highlight the importance of sustainable public finances” and the need for fiscal sustainability.
The ministers and central bank chiefs of the world’s leading nations said they met “at a critical juncture to firmly secure the global recovery and address the economic challenges and risks”.
The ministers agreed further progress on financial repair is crucial to global economic recovery. “This requires greater transparency and further strengthening of banks’ balance sheets and better corporate governance of financial firms.”
They said they are committed to reach agreement quickly on stronger capital and liquidity standards “as the core of our reform agenda”.
Ministers urged the Basel Committee on Banking Supervision to put forward rules to boost bank capital and discourage excessive leverage and risk-taking by the time of the G20 Seoul summit in November.
“It is critical that our banking regulators develop capital and liquidity rules of sufficient rigour to allow our financial firms to withstand future downturns in the global financial system,” they said.
The communique made no mention of a controversial proposal for a bank levy but said the financial sector should make a “fair and substantial contribution” towards any future state bailouts.
The ministers called for strong measures to improve the transparency, regulation and supervision of hedge funds, credit rating agencies, compensation practices and OTC (over the counter) derivatives.