Réunion des ministres des finances et des gouverneurs des banques centrales du G20 G20 Finance Ministers and Central Bank Governors’ Meeting février February 2011 G20 FINANCE MEETING Christine Lagarde Christian Noyer April 2011 – Washington DC

The G20 Finance Meeting accounts for 85% of the global economy Equatorial Guinea

Cannes Summit 3–4 November Cannes Summit 3–4 November New ideas for a new world Priorities of the French presidency of the G20 Continuation of ongoing efforts: Financial regulation Macroeconomic imbalances (Framework for Strong, Sustainable and Balanced Growth) Development Three new priorities set by President Sarkozy: Reform of the international monetary system Tackling commodity price volatility Global governance  The goal: a stronger, more stable and more resilient global economy Paris février Washington 14 – 15 avril Paris octobre

Areas of focus Areas of focus: 1.Identify macroeconomic imbalances in order to reduce them and lay the foundations for strong and sustainable growth 2.Reform the international monetary system to achieve financial stability in a multi-polar world 3.Reduce excessive commodity price volatility and limit its impact 4.Ensure comprehensive financial regulation 5.Develop infrastructures in developing countries and provide innovative financing for climate change

Washington G20 Finance Meeting Principal expectations Continue efforts begun at the meeting in Paris in February 1.Progress on the definition of indicative guidelines for the Framework for Strong, Sustainable and Balanced Growth, in order to reinforce our capacity to coordinate our economic policies 2.Follow up on the fruitful discussions at the High ‐ Level Seminar on the International Monetary System in Nanjing 3.Guide ongoing work as regards financial regulation 4.Further elaborate G20 responses to commodity price volatility 5.Reaffirm the G20's support for efforts on innovative financing for both climate change and development

Areas of focus 1.Identify macroeconomic imbalances in order to reduce them and lay the foundations for strong and sustainable growth 2.Reform the international monetary system to achieve financial stability in a multi-polar world 3.Reduce excessive commodity price volatility and limit its impact 4.Ensure comprehensive financial regulation 5.Develop infrastructures in developing countries and provide innovative financing for climate change

1: Identify the sources of macroeconomic imbalances…

…and agree on indicative guidelines… Public debt and fiscal deficit; Private savings rate and private debt; External imbalances: trade balance, net investment income flows and transfers, taking due consideration of exchange rate, fiscal, monetary and other policies. Agreement on a set of indicators in February in Paris Defining the indicative guidelines with stricter criteria for systemic economies Identifying the main macroeconomic imbalances Preparing the next steps of the mutual assessment process => action plan for a strong, sustainable and balanced growth (Cannes, November 2011) Discussions during Washington G20 Finance meeting Titre de la présentation8

Improving the Framework for Strong, Sustainable and Balanced Growth …in order to improve coordination for growth Agreement on indicators for assessing major imbalances (February) Identification of imbalances with the help of indicative guidelines An ambitious action plan : - Reducing imbalances - Supporting growth Titre de la présentation9

Areas of focus 1.Identify macroeconomic imbalances in order to reduce them and lay the foundations for strong and sustainable growth 2.Reform the international monetary system to achieve financial stability in a multi-polar world 3.Reduce excessive commodity price volatility and limit its impact 4.Ensure comprehensive financial regulation 5.Develop infrastructures in developing countries and provide innovative financing for climate change

International Monetary System Actions to take Going back to fixed exchange rates Questioning the role of the dollar Introducing widespread capital controls What we do not intend to do: Improving economic policy coordination (surveillance, exchange rates) Reducing the need to accumulate foreign currency reserves Better monitoring and understanding international capital flows Ensuring the emergence of new international currencies What we plan to do: 11

Working areas Capital flows management Surveillance of capital flows Development of local financial markets Global liquidity management Definition and measurement of global liquidity The role of SDRSDR basket compositionDiscussion about international reserves Financial Safety Nets – towards a new instrument for providing short-term liquidity Relationships between Regional Financial Arrangements and the IMF 12 Surveillance Exchange rates

2.1. Reduce the need to accumulate reserves For the country concerned (opportunity cost) For the global economy (source of imbalances) Accumulating reserves is costly Assessment of « Financial Safety Nets » and improvement, if needed, particularly to deal with systemic crises Improved coordination between existing international and regional arrangements Discussion on the optimal level of reserves Development of local currency financial markets Areas of focus: improving liquidity supply in times of crisis Titre de la présentation13

2.2. Better monitor international capital flows The size of capital flows is problem for recipient countries but so is the multiplication of unilateral measures to face them Setting up a framework allowing to monitor capital flows. This framework will allow: to discuss the impact of economic policies of both source and recipient countries on this flows, in a cooperative way to identify economic policy coordination patterns which are mutually beneficial Areas for discussion Titre de la présentation14

2.3. Ensuring the emergence of new international currencies A risky transition Careful planning of the inclusion of new currencies in the composition of the SDR basket In the longer term, reflect on the role of the SDR in the IMS Develop local currency trade settlement in emerging economies Possible solutions Titre de la présentation15 New economic focal points New international currencies

Areas of focus 1.Identify macroeconomic imbalances in order to reduce them and lay the foundations for strong and sustainable growth 2.Reform the international monetary system to achieve financial stability in a multi-polar world 3.Reduce excessive commodity price volatility and limit its impact 4.Ensure comprehensive financial regulation 5.Develop infrastructures in developing countries and provide innovative financing for climate change

3. Reducing commodity price volatility and limiting its impact Incomplete information about physical assets, which does not cover all commodities The physical and financial commodities markets are insufficiently regulated compared to other markets, and thus open to abuses Imperfect markets Reduce volatility through higher transparency on the fundamentals (consumer behavior, supply determinants, inventories) Use risk-management tools to cushion the impact of volatility Better forecasting and management of food crises Prevent and limit market abuse and ensure good risk management, through a regulation of all markets and financial instruments Regulate commodity derivatives, like other derivatives What we plan to do

3. Commodity price volatility – G20 Finance meeting Washington Support the JODI oil database and efforts on price-setting agencies Energy Discussions of the report by international organizations on agricultural and food commodity price volatility, and on hedging and risk management tools Food security Assessment of the work on regulation and supervision of commodity derivatives, to prepare concrete recommendations for the G20 Regulation of commodity derivatives Titre de la présentation18

Areas of focus 1.Identify macroeconomic imbalances in order to reduce them and lay the foundations for strong and sustainable growth 2.Reform the international monetary system to achieve financial stability in a multi-polar world 3.Reduce excessive commodity price volatility and limit its impact 4.Ensure comprehensive financial regulation 5.Develop infrastructures in developing countries and provide innovative financing for climate change

4. Ensuring comprehensive financial regulation Harmonized and effective implementation of the commitments made by the G20 Goal Coordinated implementation of Basel 3 Implementation of FSB standards on compensation, accompanied by an effective peer review process Reduce reliance on rating agencies Ensure clearing of standardized OTC derivatives Converge towards a single set of high quality accounting standards by the IASB and FASB and reform the governance of IASB What we plan to do

4. Ensure comprehensive financial regulation 21 Protect citizens, the financial system and the real economy against systemic risk Goal Identify systemic financial institutions Set up firewalls and safeguards in the event of a failure: higher loss absorbency measures, resolution regimes and coordination between colleges of supervisors Increase the integrity of the financial markets and extend financial regulation to the shadow banking sector What we plan to do:

4. Financial regulation G20 Finance meeting Washington Evaluation of the FSB's proposals concerning its governance and resources Governance of the Financial Stability Board (FSB) Continue efforts to identify systemic financial institutions and the higher loss absorbency measures to apply to them Define the scope of the shadow banking sector Systemic risk Monitor implementation of compensation policies standards Support the convergence of accounting standards Continued efforts Titre de la présentation22

Areas of focus 1.Identify macroeconomic imbalances in order to reduce them and lay the foundations for strong and sustainable growth 2.Reform the international monetary system to achieve financial stability in a multi-polar world 3.Reduce excessive commodity price volatility and limit its impact 4.Ensure comprehensive financial regulation 5.Develop infrastructures in developing countries and provide innovative financing for climate change

Mobilize financing for development and for the fight against climate change Goal Follow up concretely on the High-Level Advisory group on Climate Financing Mobilize public and private investors to build infrastructures that are necessary to the sustained development of developing countries, particularly in Sub-saharan Africa, with the help of the high-level panel chaired by Tidjane THIAM, and the multilateral development banks Identify innovative financing for development, building on the mandate given to Bill GATES by President SARKOZY What we plan to do 5. Meeting our commitments towards development and the fight against climate change