Finance Minister Paul Martin today welcomed progress on several key elements of a plan by the Group of Seven industrialized nations (G-7) to improve the stability of the international financial system.
Commenting in Bonn, Germany, where he attended a meeting of G-7 Finance Ministers and Central Bank Governors, Minister Martin said, "We must work together to build the kind of global financial architecture that will prevent or minimize economic crises in the future. I am encouraged by measures aimed at ensuring greater transparency and promoting effective co-operation and co-ordination among international institutions, regulatory bodies and supervisory bodies."
Last September, Minister Martin proposed a six-point plan for a co-ordinated response to deal with global financial turmoil. The plan was designed to address immediate dangers by ensuring that interest rates support sustainable growth, promoting a sound policy environment in the emerging markets, and ensuring that the poorest countries receive the support that they need to reduce poverty and begin growing.
The six-point plan would also help prevent future crises by strengthening financial sector supervision, ensuring that private investors bear their share of the burden in times of crisis, and helping developing countries open their economies to global capital markets safely. Several elements of Canada's plan were endorsed by G-7 Finance Ministers and Central Bank Governors in an October 1998 joint declaration.
Today in Bonn, Minister Martin joined his G-7 colleagues in welcoming the report prepared by the President of the Deutsche Bundesbank, Mr. Hans Tietmeyer, on ways of improving international co-ordination and co-operation among financial regulators. The report recommends the creation of a Financial Stability Forum. As a mechanism for the regular exchange of views among financial regulators and supervisors, the Financial Stability Forum would help to identify gaps in international regulation and supervision. It would be accountable to G-7 Finance Ministers and Central Bank Governors.
The Financial Stability Forum would include key players such as the G-7, the International Monetary Fund, the World Bank, the Bank for International Settlements and the Organization for Economic Co-operation and Development. Also included would be international regulatory associations such as the International Organization of Securities Commissions, the International Association of Insurance Supervisors and the Basle Committee on Banking Supervision.
Mr. Tietmeyer's proposal responds to the call by Minister Martin last spring for a better international network of national regulators and supervisory authorities to prevent financial crises. Minister Martin said, "I am pleased to see that we are making progress in establishing virtual institutions' that can share expertise to prevent financial crisis and promote stability and growth in the world's financial system."
Minister Martin also commented on the importance of continuing co-ordinated efforts by the IMF, the World Bank, other international organizations and donors to address the social consequences of financial and economic instability as well as the needs of the heavily indebted poor countries (HIPCs).
"We must address the problems of the poorest countries," Minister Martin said. Canada's approach is to work with its G-7 colleagues to make the HIPC initiative at the World Bank and IMF more effective, and to work towards complementary bilateral actions where debt relief could be used productively.
The Minister also expressed the view that preventing recurring debt problems has to be a core objective of any debt reduction and relief effort. This depends on good governance, investments in priority social sectors and the provision of more transparent information on economic data and policies.
Minister Martin also confirmed that he expects Canada's fiscal, economic and public financial data to meet all requirements of the IMF Special Data Dissemination Standard (SDDS)1. The creation of the SDDS was one of the major outcomes of the 1995 Halifax Summit.
"Since the Halifax Summit, Canada has been a leader among IMF countries in the drive for more transparent, timely and accurate data," said Minister Martin. He pointed out that, last December, Canada for the first time released the Statement of the IMF Mission regarding Canada's 1998 Article IV Consultation.
1 In accordance with Canada's obligations under the SDDS, an advance release calendar for The Fiscal Monitor is available on the Department of Finance Internet Web site at http://www.fin.gc.ca/fiscmon/fmdates_e.html. This calendar will be updated each month with the release of The Fiscal Monitor. A note to this effect will be added to this publication.
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