13 November 2008

Canada's proposals

The following was reported on in the 13 November 2008 edition of “globeandmail.com”.

Finance Minister Jim Flaherty says it would be a mistake for international leaders to try to revamp the world's financial system at the summit this weekend. The meeting of leaders of the G20 has been convened to talk about the financial crisis. But Mr. Flaherty said this is not the time to try to make fundamental changes to international financial institutions such as the World Bank and International Monetary Fund, as some leaders have called for.

"In the middle of a crisis is [not] the time to build up grand schemes and create new international institutions," he said at a conference in Toronto yesterday. "Getting one's house in order first is the right approach." Canada will take a list of five key recommendations to the meeting, Mr. Flaherty said. They are:

All pools of capital that rely on leverage must be regulated.

Capital and liquidity buffers must be large enough to handle major shocks.

Regulators must keep track of overall financial systems, not just individual institutions.

Market infrastructure must be more transparent and resilient. Non-transparent transactions such as over-the-counter trades and naked short-selling have increased the fragility of financial systems.

There needs to be stronger international co-ordination, review and surveillance, to create a second line of defence.

Mr. Flaherty said the international financial crisis could have been prevented if other countries had effective regulatory regimes - such as Canada's.