G-20 finance ministers in Moscow: a diagnosis of the global economy

G20 Finance Ministers agree deal on restructuring government debt

Tighter financial regulation will become a global trend in the coming years

Vladimir Putin received G20 finance ministers and central bank governors at the Kremlin. The meeting took place within the framework of the Russian chairmanship of the G-20. This is the first of four pre-summit meetings of finance ministers and heads of central banks of the countries of the group. The G20 Summit of Heads of State and Government will be held in St. Petersburg in September.

The main topics of the meeting in Moscow were the actions of states to stimulate the growth of the world economy. The final communiqué states: significant risks remain, while the growth rate of the global economy remains too low.

The leaders of the G20 financial institutions, however, noted some improvement in the global situation associated with important political measures taken in Europe, the United States and Japan, as well as the stability of the Chinese economy.

“Addressing weak global growth requires significant reforms and coordinated policies, which are key to achieving strong, sustainable and balanced growth and restoring confidence. We will continue to deliver on our commitments, including financial reforms to create a more resilient financial system and meaningful structural reforms to foster growth, ”the communique said following the Moscow meeting.

After the end of the group’s work over the weekend, Russian Deputy Finance Minister Sergei Storchak held a meeting with journalists, during which he announced that “the pendulum has swung in the direction of tightening financial regulation.”.

As Storchak explains, the meeting participants worked out a number of measures to tighten regulation of the financial sector. Among them: the widespread implementation of Basel III banking standards, the reform of the market for financial derivatives and work on the creation of a global Legal Entity Identifier (LEI) system. The group also announced its intention to strengthen supervision and regulation of the shadow banking sector. In addition, the G20 will refrain from deliberately devaluing currencies to support economic growth..

Tightening is the trend

Natalya Orlova, chief economist at Alfa Bank, in a conversation with a correspondent for the Russian service of the Voice of America, outlined her vision of the reasons for the tightening that the G20 is trying to carry out..

“The toughenings in question are aimed at redirecting financial flows,” Orlova said. – Now the main threat to the recovery of the world economy is the formation of a bubble in financial assets of real estate, in different markets. The point is that, perhaps, money in developed countries will go not at all to restore lending and the real sector, but to expand financial transactions and increase asset prices. The tightening of financial regulation is tailored to ensure that this money reaches its final recipients: households and companies. “.

Natalia Orlova has no doubts that regulation will become stricter: “But this is not a question of one year, it is a question of many years and a certain trend.”.

Separately, Orlova commented on the statement on the widespread introduction of a single banking standard “Basel III”: “This causes a lot of heated discussions and complaints. In a number of countries, decisions are even made to delay the introduction of these standards a little..

In Russia, the implementation of Basel III is planned to begin in the fall of this year. “But I understand that this is not yet a final decision, although, of course, the Central Bank of Russia confirms its intention to introduce Basel III standards. The situation is simply complicated by the fact that we have not yet introduced the Basel II standard. And in fact, now there is such a situation that Basel III will be introduced faster than Basel II, which is supposed to be introduced in 2015, “Orlova explains..

“Of course, Russia will move in a general trend, but the question, again, about certain nuances and specific dates will be the subject of discussion,” the economist sums up..

G-20 finance ministers in Moscow: a diagnosis of the global economy

The world is learning to negotiate within the framework of existing risks

Natalya Volchkova, professor at the Russian School of Economics, Director of Applied Research at CEFIR, agreed to comment to the Voice of America correspondent on the results of the Moscow meeting and its final communiqué.

Volchkova agrees that the tightening of financial regulation will continue not only during the Russian presidency. “The decisions taken show that there is a very significant continuity. Some decisions and reforms started last year, they were continued and formalized in the Russian year, and will be signed next year. The reason is that the adopted communiqué, the decisions made – they are really worked out in the course of joint discussion. This is often the initiative of the chair country. But the support and interest of the group members is a prerequisite for the inclusion of certain initiatives in the final document. Therefore, the currently adopted solutions to problems with financial regulation, of course, will be worked out both during this year and subsequent ones, “Volchkova explained..

The Russian expert reminds that the main instrument of financial regulation is the Financial Stability Council, which exists parallel to the G20: “The agenda adopted by the G20 is being worked out and commented on by the Council. This is very important, because they will also implement this continuity. “.

Professor Volchkova comments on the adopted communique: “There are several points of financial regulation, which, perhaps, are not so interesting to Russia. More precisely, they are of interest to Russia, but this is not its primary concern. This applies more to other countries, including in their interaction with our country. For example, European countries especially supported the clause concerning measures that would lead to an increase in national tax bases. That is, they would reduce the opportunity for large transnational corporations to optimize taxation through non-trivial use of international and national jurisdictions. This is less relevant for Russia and for developing countries among the G20 members, and more important for developed countries that face these problems. “.

“At the top level, Russia expressed its interest and desire to comply with all the decisions made, although at some points it will be difficult, given the existing systems, banking systems and banking institutions, for example. But this is true for all the developing countries of the G20. There is an interest in switching to the Basel III standard, taking into account, among other things, the risks that this standard can prevent. They are relevant for everyone. But this is a movement that requires not only time, but also development, ”the professor will explain the new banking standards..

“Now we see that the world is learning to negotiate within the framework of the risks that exist, which are tangible today,” sums up the professor of the Russian School of Economics Natalya Volchkova.

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