March 14, 2009

Archived - G20 Finance Ministers' and Central Bank Governors' Communiqué

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We, the G20 Finance Ministers and Central Bank Governors, met today to prepare for the Leaders' London Summit. We agreed further action to restore global growth and support lending, and reforms to strengthen the global financial system.

Restoring Global Growth

1. We have taken decisive, coordinated and comprehensive action to boost demand and jobs, and are prepared to take whatever action is necessary until growth is restored. We commit to fight all forms of protectionism and maintain open trade and investment.

2. Our key priority now is to restore lending by tackling, where needed, problems in the financial system head on, through continued liquidity support, bank recapitalisation and dealing with impaired assets, through a common framework (attached).  We reaffirm our commitment to take all necessary actions to ensure the soundness of systemically important institutions.

3. Fiscal expansion is providing vital support for growth and jobs. Acting together strengthens the impact and the exceptional policy actions announced so far must be implemented without delay. We are committed to deliver the scale of sustained effort necessary to restore growth, and call on the International Monetary Fund (IMF) to assess the actions taken and the actions required. We will ensure the restoration of growth and long-run fiscal sustainability.

4. Interest rates have been cut aggressively in most countries, and G20 central banks will maintain expansionary policies as long as needed, using the full range of monetary policy instruments, including unconventional policy instruments, consistent with price stability.

5. We are committed to helping emerging and developing economies to cope with the reversal in international capital flows. We recognise the urgent need to pursue all options for mobilising International Financial Institution (IFI) resources and liquidity to finance countercyclical spending, bank recapitalisation, infrastructure, trade finance, rollover risk and social support. We agreed on the urgent need to increase IMF resources very substantially. This could include further bilateral support, a significantly expanded and increased New Arrangements to Borrow (NAB), and an accelerated quota review. We should also ensure that all Multilateral Development Banks have the capital they need, beginning with a substantial capital increase for the Asian Development Bank, and put it to best use to help the world's poorest. We welcomed the progress by the IMF and World Bank in introducing new and enhanced instruments, including the development of a new high-access, quick-disbursing precautionary facility.

Strengthening the Financial System

6. To further strengthen the global financial system we have completed the immediate steps in the Washington Action Plan and we welcome the Financial Stability Forum's (FSF) expansion to all G20 members. We remain focused on the medium term actions, and make recommendations to the London Summit to ensure: 

  • all systemically important financial institutions, markets and instruments are subject to an appropriate degree of regulation and oversight, and that hedge funds or their managers are registered and disclose appropriate information to assess the risks they pose; 
  • stronger regulation is reinforced by strengthened macro-prudential oversight to prevent the build-up of systemic risk;
  • financial regulations dampen rather than amplify economic cycles, including by building buffers of resources during the good times and measures to constrain leverage; but it is vital that capital requirements remain unchanged until recovery is assured; and,
  • strengthened international cooperation to prevent and resolve crises, including through supervisory colleges, institutional reinforcement of the FSF, and the launch of an IMF/FSF Early Warning Exercise. 

7. We have also agreed to: regulatory oversight, including registration, of all Credit Rating Agencies whose ratings are used for regulatory purposes, and compliance with the International Organisation of Securities Commissions (IOSCO) code; full transparency of exposures to off-balance sheet vehicles; the need for improvements in accounting standards, including for provisioning and valuation uncertainty; greater standardisation and resilience of credit derivatives markets; the FSF's sound practice principles for compensation; and the relevant international bodies identify non-cooperative jurisdictions and to develop a tool box of effective counter measures.

8. To strengthen the effectiveness and legitimacy of the IFIs we must enhance their governance and ensure they fully reflect changes in the world economy. Emerging and developing economies, including the poorest, should have greater voice and representation and the next review of IMF quotas should be concluded by January 2011. The package of quota and voice measures decided in April 2008 should be swiftly implemented. World Bank reforms should be completed by the Spring Meetings 2010. The heads of the IFIs should be appointed through open, merit based selection processes.

For further information, media may contact:

Chisholm Pothier
Press Secretary
Office of the Minister of Finance

Jack Aubry
Media Relations
Department of Finance

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Annex to Communiqué - G20 Finance Ministers and Central Bank Governors - 14 March

Restoring lending: a framework for financial repair and recovery

We, the G20 Finance Ministers and Central Bank Governors, agreed the need to continue working together to maintain and support lending in our financial systems. We are committed to taking decisive action, where needed, and to use all available tools to restore the full functioning of financial markets, and in particular to underpin the flow of credit, both domestically and globally. Actions to achieve this may include where necessary:

  • providing liquidity support, including through government guarantees to financial institutions' liabilities;
  • injecting capital into financial institutions;
  • protecting savings and deposits; and,
  • strengthening banks' balance sheets, including through dealing with impaired assets.

Our key priority now is to address the uncertainties around the value of assets held on banks' balance sheets, which are significantly constraining banks' lending. This uncertainty, and the extent to which banks are holding capital to protect themselves from further potential extreme losses, is preventing them from restoring lending to business and households, with damaging consequences to our economies.

A cooperative and consistent approach by national authorities to programmes addressing impaired assets should be based on the following principles:

International cooperation

1. Given the interconnectedness of the global financial system, international cooperation is important to maximise the effectiveness of these measures and reject financial protectionism. Cooperation has the potential to further maximise the benefits of these actions and address spillovers, in particular by increasing confidence in financial stability, minimising distortions to the market and maintaining a level playing field, supporting developing countries and emerging market economies, while defending taxpayers' interests.

Programme Design

2. Programmes should be appropriate to the characteristics of the banking, legislative and fiscal frameworks. International cooperation is critical in addressing negative spillovers. Programmes should be implemented quickly, comprehensively and have a limited enrolment period.

Eligibility of assets and institutions

3. The eligibility of assets for support should be kept flexible due to the difference in balance sheet compositions, the conditions in different countries and because the amount and type of impaired assets is likely to differ across financial sectors. There should be a specified cut-off date prior to announcement of the programme. Priority should be given to institutions which pose a significant risk to financial stability.

Risk transfer and burden sharing

4. If risk is to be transferred from the banking sector to governments, it should be at a fair price, including through fees, with appropriate risk sharing, to limit the cost to the government as well as prevent moral hazard, provide the right incentives to the participating institutions and maintain a level playing field across financial institutions, both nationally and internationally. Banks' shareholders should be required to contribute to the maximum extent possible to loss or risk coverage prior to government intervention.

Transparency and disclosure

5. Consistent with prudential considerations, there should be a full and transparent disclosure of the impairment of banks' balance sheets. Stress testing should include a rigorous and up to date assessment of their exposure to potential losses and of their future viability, including their capacity to continue lending and absorb potential losses in order to avoid international distortions. Governments should manage in a transparent way impaired asset resolution programmes. In order to build market confidence, governments should disclose the processes, standards and results of their impaired asset management programmes.


6. While valuation methodologies may vary depending on the proposed asset resolution program, it is critical that those methodologies are applied transparently, objectively, consistently and in a cooperative way, in order to promote a level playing field across countries and financial institutions, and to advance prudential objectives while limiting the exposure of the state to potential losses. Supervisory authorities should have an important role in validating valuation processes. This will ensure that the risk is transferred from the banking sector to governments at a fair price, including through fees, with appropriate risk sharing, to limit the cost to the government, provide the right incentives to the participating institutions and minimise distortions.


7. Firms receiving support should continue to be run according to business principles in order to prevent distortions of the effective allocation of credit to the private sector or to institutions not participating in the scheme. Conditions should be included, such as on pricing, compensation or restructuring, to limit any conflict of interests or moral hazard, with support designed to align the incentives for banks to participate and the conditions imposed on beneficiary banks with public policy objectives.


8. Restructurings should focus on maximising the effectiveness of any government support and the long-term viability of an institution and should depend on pricing relative to expected losses, the capacity of the bank to withstand residual exposures and the bank's access to other support.Where sound restructuring is supported by merger or acquisition crossborder deals, close collaboration with the relevant foreign authorities is essential.


9. Government support is a privilege and must come with strong conditions, such as a commitment to continue providing credit to appropriately meet demands according to commercial criteria, improving governance, dividend policy restrictions and executive remuneration caps. It may involve appropriate restructuring, including as necessary measures to limit competition distortions.


10. Taxpayer interest must be protected and banks participating in asset support programmes should be closely monitored.


11. Government support should be temporary and should include well-defined exit strategies and incentives.

Public Finances

12. Government support measures should be part of a sustainable mediumterm fiscal strategy.