G20 Conference Series: Reforming financial regulation & international monetary system
Talk introduced by Bernard Émie, French Ambassador to the UK and hosted by Martin Wolf, associate editor and chief economics commentator at the Financial Times.
The conference took place on Tuesday, 12 April 2011 at the Financial Times Headquarters in London.
The panel included:
- Jacques de Larosière, Honorary Governor of the Bank of France;
- Rachel Lomax, former Deputy Governor of the Bank of England;
- Dr. Haihong Gao of the Chinese Academy of Social Sciences;
- Jonathan Portes, Director of the National Institute of Economic and Social Research.
This conference is the second of a six part series about the G20 and global governance. Conferences will be organised in London throughout 2011 as part of France’s presidency of the G20 and G8:
| (1) The reform of global governance (February 23) |
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| (2) Reforming the international monetary system (April 12) |
| (3) Governance of the Internet (May 10) |
| (4) Commodity price volatility (1 June) |
| (5) Africa and development |
| (6) Climate change |
Following the introductory conference on global governance (23 February) hosted at the Ambassador’s residence, the second of our six-part series focused the debate on financial regulation and possible reform to the international monetary system. Our discerning panellists provided rich and varied analysis for the assembled audience of journalists, diplomats, officials, academics, City executives, members of NGOs and think-tanks.
Three leading themes were developed during the course of the discussion.
Initial emphasis was placed on diagnosing the causes of the financial crisis. Here the point was made that inherent structural instability was accelerated by growing imbalances, excessive leverage, and poor regulatory oversight. Jacques de Larosière provided a historical account, showing that the gold standard had eventually failed despite its virtues, and highlighted the reasons why the Bretton Woods system ceased to work properly after 1971 (excessive leverage, poor discipline, divergent interests and little propensity by big players to accept collective pressure). It is necessary, he argued, to address these failings. Martin Wolf observed, however, that the system, despite its flaws, had delivered long periods of prosperity. Rachel Lomax added that having avoided a complete collapse of the dollar - so far - was a sign of resilience in the system.
But how might this inform the future of our international monetary system? The panel expressed appreciation of French efforts to place financial reform on the global agenda. Several, however, doubted that it is actually possible to fundamentally reform the system: the fierce national interests of different states, particularly those of the United States and China, as well as disparate growth rates between different regions, need to be taken into consideration. With increasing attention being placed on China, Dr. Haihong Gao was keen to stress that China’s internationalisation would only be gradual and would be undertaken step-by-step.
The panel was in general agreement that financial regulation was likely to be the most appropriate way to proceed, although by no means an easy task. Most calls were for better macroprudential policy, while Jacques de Larosière appealed for better banking supervision (rather than an indiscriminate increase of prudential ratios). Jonathan Portes argued that national efforts like the Vickers Commission and G20 discussions on financial regulation were the way forward.
A VIDEO ROUND-UP OF THE CONFERENCE:
The complete conference can be viewed on our YouTube Channel