Leaders from the world's major developed and emerging economies agreed in Washinton on Saturday to undertake a coordinated action to tackle the ongoing global financial crisis and explore measures to prevent similar crisis in the future.

Determination and reforms

"We are determined to enhance our cooperation and work together to restore global growth and achieve needed reforms in the world's financial system," said the leaders in a declaration issued at the G20 summit on financial markets and world economy, which is held Saturday in Washington.

"Our work will be guided by a shared belief that market principles, open trade and investment regimes, and effectively regulated financial markets foster the dynamism, innovation, and entrepreneurship that are essential for economic growth, employment, and poverty reduction," the declaration said.

The Washington summit, held amid serious challenges to the world economy and financial markets, was the first time for the Group of 20 since it was founded in 1999.

The group consists of the world's major developed and emerging economies which accounting for 85 percent to 90 percent of the world's total economy and about two-thirds of the world's population.

As widely expected before the summit, the leaders vowed to implement reforms in order to strengthen financial markets and regulatory regimes so as to avoid future crisis.

Intensified international cooperation among regulator and strengthening of international standards and their consistent implementation is necessary to protect against adverse cross- border, regional and global developments affecting international financial stability, according to the leaders.

"Regulators must ensure that their actions support market discipline, avoid potentially adverse impacts on other countries, including regulatory arbitrage, and support competition, dynamism and innovation in the marketplace.

"Financial institutions must also bear their responsibility for the turmoil and should do their part to overcome it including by recognizing losses, improving disclosure and strengthening their governance and risk management practices," said the declaration.

Commitment to free markets

As expected by President George W. Bush, who said "The surest path to that growth is free markets and free people," the leaders attending the Washington summit stressed the free market principles are essential to economic growth and prosperity.

"Recognizing the necessity to improve financial sector regulation, we must avoid overregulation that would hamper economic growth and exacerbate the contraction of capital flows, including to developing countries," the declaration said.

"We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new expert restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports.

"Further, we shall strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO's Doha Development Agenda with an ambitious and balanced outcome. We instruct our trade ministers to achieve this objective and stand ready to assist directly, as necessary. We also agree that our countries have the largest stake in the global trading system and therefore each must make the positive contributions necessary to achieve such an outcome.

"We reaffirm the importance of the Millennium Development Goals, the development assistance commitments we have made, and urge both developed and emerging economies to undertake commitments consistent with their capacities and roles in the global economy.

"In this regard, we reaffirm the development principles agreed at the 2002 United Nations Conference on Financing for Development in Monterrey, Mexico, which emphasized country ownership and mobilizing all sources of financing for development," said the declaration.

Action to be taken

At the Washington summit, the leaders also agreed to an action plan of immediate and medium-term measures to cope with the global financial crisis.

The tasks include strengthening transparency and accountability, enhancing sound regulation, promoting integrity in financial markets, reinforcing international cooperation, and reforming international financial institutions.

Immediate actions, which are to be taken before March 31, 2009, include addressing weaknesses in accounting and disclosure standards, developing recommendations to mitigate pro-cyclicality, enhancing the standards of credit rating agencies, and enhancing guidance to strengthen banks' risk management practices.

They also include enhancing regulatory cooperation between jurisdictions internationally and regionally, establishing " supervisory colleges for all major cross-border financial institutions, steps necessary to strengthen cross-border crisis management arrangements, and the expansion of the Financial Stability Forum" to a broader membership of emerging economies."

Medium-term measures include working toward the objective of creating a "single high-quality global standard" for accounting, collaboration to ensure "consistent application and enforcement of high-quality accounting standards," enhanced risk disclosures by financial institutions, commitment to undertaking a "Financial Sector Assessment Program" report and supporting the transparent assessments of countries' national regulatory systems, and requiring that credit rating agencies that provide public ratings be registered.

Other medium-term measures prescribed include development of robust and internationally consistent approaches for liquidity supervision of and central bank liquidity operations for cross- border banks, awareness and ability to "respond rapidly to evolution and innovation in financial markets and products," monitoring of "substantial changes" in asset prices and their implications for the macroeconomy and the financial system, implementation of national and international measures that protect the global financial system "from uncooperative and non- transparent jurisdictions" that pose risks of illicit financial activity.

The world leaders agreed to meet again by April 30, 2009, to review the implementation of the principles and decisions agreed at the Washington summit.

(Xinhua News Agency November 16, 2008)