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European Financial Services Round Table
Publication/Research Document

EFR letter ahead of G20 Finance Ministers' meeting on 14/15 October 2011
Brussels, Friday 7 October 2011 Dear Minister, We commend the G20 governments for their declared commitment to enhance macro-economic policy coordination and financial regulatory reform to meet the twin objectives of strengthening both growth and employment and creating a more stable financial system. EFR Members remain strongly committed to supporting and furthering these objectives and to engaging in an intensive dialogue with policy-makers. Unfortunately, the outlook for global output and employment growth has darkened over recent months. Recent market movements reflect the widespread uncertainty perceived by households and investors about the future path of global economic developments. As the OECD remarked in its recent Interim Economic Assessment, there is a severe crisis of confidence in economic policies around the globe. In these circumstances, we regard it as crucial that G20 finance ministers send again a clear message on their policy goals, the measures needed to achieve them and the degree of coordination required. Ministers have recognised the importance of tackling the growth challenge at this time. Over the medium term, a move to sustainable fiscal and monetary policies is essential. However, given that traditional macro-economic policy instruments are constrained in many countries at the moment, it is all the more important for countries to make use of policy measures that support growth without having direct budgetary implications. Trade liberalisation, a convergence of technical industry standards, as well as financial standards and market integration are good examples. A joint G20 declaration on the crucial importance of reinvigorating growth and implementing coordinated policy measures is essential to avoid current downside risks becoming entrenched. We believe that the current policy environment also underscores the need to ensure convergence of international regulatory standards, to ensure that rules focus on activities and risks in a consistent manner, to expand and understand the perimeter of financial regulation to avoid regulatory arbitrage, while at the same time recognising that financial stability is fostered by a diversity of financial actors. In addition to these general concerns on the economic outlook and regulatory processes, there are three specific issues to which we would like to draw your attention: First, as regulation is tightened, incentives to transfer activities into less strictly regulated financial institutions and markets are mounting, increasing significantly the risk of regulatory arbitrage in these market segments. There is a need for comprehensive regulatory approaches that are consistent across markets and across continents. Second, recognising the crucial importance of realising a single high-quality set of accounting standards for financial stability and market integration, G20 leaders have agreed to achieve convergence by the end of 2011.