6. Strengthening Financial Market Supervision and Regulation

The growth of financial markets, the development of new instruments, and a desire for diversification of investment have spurred global integration of national markets and increased liquidity. These developments have led to a more efficient allocatio and thus greater growth of economic activity. At the same time, with today's highly integrated financial markets, there is a greater potential for the rapid transmission of financial disturbances. Close international cooperation in the regulation and supe and markets is essential to the continued safeguarding of the financial system and to prevent erosion of necessary prudential standards.

Continued strengthening of these efforts has the full support of G-7 Finance Ministers and Central Bank Governors. We look forward to the development and further enhancement of concrete international understandings, where necessary and appropriate, o the safeguards, standards, transparency, and systems necessary to reduce potential risks. In this context, we recognize the important initiatives being undertaken separately and jointly by various committees under the aegis of the BIS and the Internationa Commissions as well as by national authorities.

• The G-10 should be encouraged to intensify their review of work in this area and there should be a call for the Basle Committee on Banking Supervision and the International Organization of Securities Commissions to work closely together in add major issues in this area and the desirable steps to address identified problems and to report back. These reports should help Ministers to reach conclusions regarding the extent of systemic risks and their implications for the world economy, measures deemed essential to an integrated approach to potential systemic risks.

• The IMF should consider extending existing obligations regarding the convertibility of current account transactions to the staged liberalization of capital account transactions. At the same time, the IMF, the World Bank and regional development banks authorities should encourage an integrated approach to ensure that adequate supervisory, regulatory and policy structures are in place to support the sound development of financial markets in countries which are removing these restrictions. This migh example, by increasing technical assistance and strengthening contacts with other regulatory authorities.

We also recognize that international financial fraud is a growing problem. We are committed to improve communication between regulators and law enforcement agencies.

	This Information System is provided by the University of Toronto Library and the G8 Research Group at the University of Toronto.
	Please send comments to: g8@utoronto.ca Revised:

All contents copyright © 1995. University of Toronto unless otherwise stated. All rights reserved.