HISTORIC PRESS RELEASE : Strengthening International Financial Systems [October 1998]
The press release issued by HM Treasury on 30 October 1998.
Significant reforms to strengthen the international financial system were announced today by Chancellor of the Exchequer Gordon Brown in the UK’s role as Presidency of the G7 leading industrial nations.
The statement, agreed by all G7 Finance Ministers and Central Bank Governors, reflects the shared determination of the UK and G7 to modernise the financial system and to put in place new rules and procedures that will promote stability and growth. It affirms that the G7 commit themselves to :
create or sustain conditions for strong, domestic demand-led growth
develop improved procedures for managing crises and preventing them from spreading, including an enhanced IMF financing mechanism supported by private and bilateral finance as appropriate
develop and implement international principles and codes of best practice on: fiscal policy, financial and monetary policy, corporate governance and accounting; and to work to ensure that private sector institutions comply with new standards of disclosure
improve global regulation through co-operation and co-ordination of the activities of key international institutions and national authorities in the management and development of policies to foster stability and reduce systemic risk in the international financial system and better exchanges of information support reforms to improve the effectiveness of the IMF, including transparency and accountability and changes in lending policies and terms of lending.
The agreement follows intensive discussions between G7 countries. As G7 President, Gordon Brown has led this process of negotiation, following agreement at the IMF meetings in Washington earlier this month to develop quickly proposals for reform.
G7 Finance Ministers and Governors will monitor progress and report to Heads of Government before the Cologne Summit on the impact of the measures they have taken today, and their proposals for further action.
Key Points
The agreement reflects the shared determination of the UK and G7 to modernise the financial system and to put in place new rules and procedures that will promote stability and growth. The key points are that the G7 :
agree that the balance of risks in the world economy has shifted from high inflation to concerns about low growth, and commit themselves to create or sustain conditions for strong, domestic demand-led growth;
agree to implement new arrangements for finance to deal with contagion, including an enhanced IMF financing mechanism supported by private sector involvement, and by bilateral finance as appropriate;
commit to develop and implement international principles and codes of best practice on fiscal policy, financial and monetary policy, corporate governance and accounting; and to work to ensure that private sector institutions comply with new standards of disclosure;
agree to encourage all countries to meet these standards, and call on the IMF to monitor and report on countries compliance;
agree to establish a new process for surveillance of supervisory regimes, and to bring together the international institutions and national regulators to cooperate, coordinate, and exchange information;
commit to develop better procedures for crisis management,including more orderly workouts of debt, effective insolvency and debtor-creditor regimes, lending into arrears by the IMF, and innovative financing techniques by the private sector;
commit to a presumption in favour of openness at the IMF and World Bank and to establish a formal mechanism for evaluation of IMF policies and operations;
undertake to do further work on strengthening prudential regulation, maintaining sustainable exchange rate regimes, developing new structures for coordinating official finance, and strengthening the Interim Committee and the Development Committee at the IMF and World Bank.
