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The G20 Process - International Cooperation Versus Differing National Priorities

The recent financial crisis has brought about an initial consensus on the need for regulatory change amongst the G20 countries. After their meeting in Pittsburgh in summer 2009, the G20 Leaders published a Communiqué in which they expressed their joint commitments to build a more resilient international financial system.  Since then, many of the international institutions (such as the International Monetary Fund (IMF), Bank of International Settlements (BIS), acting through the Basel Committee on Banking Supervision (BCBS) and Financial Stability Board (FSB)) have been working on proposals to help the G20 achieve their objectives. Further to this, a number of the G20 countries have also initiated their own proposals in an effort to achieve greater financial stability in their respective countries. 

The question remains, however, as to how much momentum there remains in this international response to the crisis, particularly as we move from the initial crisis management phase. Issues which are ripe for consideration include:

What does the future hold for G20 cooperation?

- To what extent will national priorities predominate as the crisis ebbs? To what extent will domestic politics influence the national legislative outcomes? To what extent will this be a problem when the G20 are trying to reach coordinated international policy agreements?
- The most obvious divergence in regulatory needs is between the emerging market members of the G20 and the ‘old’ G8. How important is it that policies converge between these two groupings when domestic financial markets and macroeconomic climates are so different?
- Will the G20 admit victory without substance? There may well be an agreement on capital and liquidity before year end, but differences across members in the substance and timing of the implementation may suggest that this is agreement in name only.
- What will drive coordination of the G20? Will there be a change in the balance of power within the G20, from US and Europe to Canada, Australia, Japan and the emerging world, and might this lead to better, more considered, coordination of international regulatory policies on a truly international scale?
- What will be the consequences of uncoordinated response?  Who will suffer from regulatory arbitrage? Indeed, is there really even a need for a coordinated regulatory response, given that the crisis affected countries differently?

The ICFR welcomes research proposals from partners interested in looking into such issues and other related questions around the ongoing G20 response to the financial crisis.

For more information, please contact us at [email protected]