16 Nov : Heeding to demands from countries like India, the G-20 has favoured expanding the membership of the Financial Stability Forum, an exclusive advisory body of the G-7, to include "emerging economies" to help create better regulation in the crisis-hit global financial system.
The FSF "should expand to a broader membership of emerging economies," the G-20 leaders said in their action plan after a meeting in Washington to beat the global economic crisis.Prime Minister Manmohan Singh, who addressed the G-20 Summit in Washington on Saturday, had called for a "broadbased" multilateral approach and consultation to overcome the raging financial crisis.
"Bodies such as the G-7 are no longer sufficient to meet the demands of the day. We need to ensure that any new architecture we design is genuinely multilateral with adequate representation from countries reflecting changes in economic realities," Singh, the economist-turned-politician, had said.
The FSF was convened in April 1999 to promote international financial stability through information exchange and international co-operation in financial supervision and surveillance.
The FSF currently comprises national financial authorities from the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) countries, Australia, Hong Kong, Netherlands, Singapore and Switzerland, as well as international financial institutions, international regulatory and supervisory groupings, committees of central bank experts and the European Central Bank.
The G-20 declaration said those international financial institutions "should strengthen their collaboration, enhancing efforts to better integrate regulatory and supervisory responses into the macro prudential policy framework and conduct early warning exercises."
The leaders argued that the IMF should "take a leading role in drawing lessons from the crisis," while also urging the Washington-based lender and its funding nations to review the fund’s "adequacy of the resources."
Singh had also pressed for a comprehensive review of the procedures of the IMF that would enable the Fund to perform the role of macro-economic policy coordination.
"An important element of longer term reform is to restructure the representation in the governance levels of the Fund to reflect the current and prospective economic realities," the Prime Minister had said.
In its declaration, the G-20 leaders said: "We should explore ways to restore emerging and developing countries’ access to credit and resume private capital flows which are critical for sustainable growth and development, including ongoing infrastructure investment."
In cases where severe market disruptions have limited access to the necessary financing for counter cyclical fiscal policies, multilateral development banks must ensure arrangements are in place to support, as needed, those countries with a good track record and sound policies, the G-20 leaders said.
"We underscored that the Bretton Woods Institutions must be comprehensively reformed so that they can more adequately reflect changing economic weights in the world economy and be more responsive to future challenges.
"Emerging and developing economies should have greater voice and representation in these institutions," the declaration said.