Statement of the Finance Ministers of Brazil, China, Russia and India
Horsham, United Kingdom, March 14, 2009
See G20 Communiqué [HTML][PDF]
See Annex: Restoring Lending: A Framework for Financial Repair and Recovery [HTML][PDF]
See Progress Report on the Immediate Actions of the Washington Action Plan [PDF]
We, the Finance Ministers and their representatives of
Brazil, Russia, India and China held our meeting in Horsham, the
United Kingdom, on the eve of the G20 Finance Ministers and
Central Bank Governors Meeting. We reverted once again to the
current situation in the global economy and its latest trends,
as well as fiscal and monetary policy responses in BRIC
countries. We also discussed the forthcoming G20 Leaders' Summit
agenda and the expected outcomes. We consider that the G2O's
position as the focal point to coordinate with global economic
and financial challenges and to lead international efforts
responding to the current crisis should be consolidated. We
exchanged views on the reform of international financial
institutions. As a result of our deliberation we deem it
necessary to focus the further international efforts in the
following areas.
We agreed that the stabilization of international
financial system through recapitalization, liquidity support and
cleaning of bank balance sheets with such governmental action as
may be necessary is a priority. These measures are vital to
rebuild confidence, maintain and support credit flow to help
restore growth.
Presently, as many other countries, BRICs are taking
measures to promote domestic demand in their national economies
and will continue to do so, as necessary. While recognizing the
need of such anti-crisis measures we consider it necessary to
ensure that they are implemented in such a way that they would
not hamper efforts needed to ensure mid-term and long-term
macroeconomic sustainability according to the particular
conditions of each country.
We realize that protectionism is an increasingly real
threat to the global economy. We should avoid protectionism of
all kinds and not allow it to act as a disruptive force to the
global economy. Failure to do so creates risks repeating the
mistakes of the past which lead to the Great Depression. World
leaders must commit to work towards a prompt and successful
conclusion of the Doha round, with an ambitious, comprehensive
and balanced result.
We stress that major reserve currency issuing economies
should step up information sharing and policy coordination and
work to ensure that the macroeconomic policy is more balanced,
proactive, coordinated and countercyclical with a view to
promoting global economic recovery. We also urge developed
economies and development institutions to strengthen their
support for the hardest hit developing countries to ensure the
achievement of the MDGs.
As regards the current G20 policy agenda we realize the
need to reduce the gap between the global nature of financial
markets and the national character of regulation. In this
context we call for achieving greater consistency in the
regulatory principles that would apply to similar markets and
institutions performing similar activities and strengthening
cooperation between national regulators. It seems expedient that
activities of such regulators should aim to reduce information
asymmetries which have grown due to increasing complexity of
financial markets. On the whole we share plans to reduce the
procyclical character of existing regulatory practices which may
induce the behavior of the financial institutions that amplify
the magnitude of economic cycles.
We consider that all financial activities - especially
those of systemic importance - must be subject to adequate
regulation and supervision, including institutions which are in
the "shadow banking system". Internationally important financial
institutions that are systemically relevant should be
effectively supervised. We therefore firmly support the
suggestion broadly discussed within the G20 working groups to
intensify supervision of hedge funds, and private pools of
capital which have made a significant impact on global markets
but for a long time had been in a shadow of international
regulatory system. Rating agencies should be also subject to
adequate regulation and supervision.
We note that the crisis has led to a massive withdrawal
of private capital in 2009 and this is likely to continue in
2010. It is imperative that multilateral financial institutions
should expand their lending to offset the massive decline.
We draw our special attention to the reform of
international financial institutions. We stand for reviewing the
IMF role and mandate so as to adapt it to a new global monetary
and financial architecture. We emphasize the importance of a
strong commitment to governance reform with a clear timetable
and roadmap.
We consider that IMF resources are clearly inadequate and
should be very significantly increased through various channels.
Borrowing should be a temporary bridge to a permanent quota
increase as the Fund is a quota-based institution. Hence we call
for the completion of the next general review of quotas by
January 2011.
We also call for a substantial SDR allocation.
We deem it necessary to develop new credit facilities
that could assist countries facing financial problems. Those new
facilities would bear new and more flexible approaches to the
issue of conditionality and have a precautionary dimension.
The crisis has demonstrated that the Fund must strengthen
its surveillance capability. To achieve this goal, we emphasize
the importance of better-focused even-handed surveillance across
all IMF members, especially in respect to advanced economies
with major international financial centers and large
cross-border capital flows.
We call for urgent action with regard to voice and
representation in the IMF, in order that they better reflect
their real economic weights. In the Fund, a significant
realignment of quota should be completed not later than January
2011. This is necessary to enable members more equitable and
fuller participation in the Fund's efforts to play its mandate
role. A rebalancing of representation on the Executive Board and
DVIFC would lead to a more equitable representation of the
membership.
We call for the study of developments in the
international monetary system, including the role of reserve
currencies. This would help clarify the role of the Fund in the
international economy in light of lessons drawn from the crisis.
We also call for the swift activation of the IMF's new
income model, including the speeding up of the process required
for the sale of a portion of the Fund's gold.
We also ask for the speeding up of the second phase of
voice and representation reform in the World Bank Group, which
should be completed by April 2010. This process should ensure
they fully reflect changes in the world economy and in this
respect developing countries and emerging economies should have
greater voice and representation. This process should be also
aimed at equitable representation between advanced and
emerging/developing countries without dilution of any individual
developing members. Moreover, to fulfil a countercyclical role
in the present circumstances, the World Bank should raise
substantive resources from the global capital markets in order
to enhance its lending capacity, including in support to trade
finance. It will also need to relax the present single borrower
limit and provide new funding for infrastructure projects in low
and middle income countries.
It also imperative that the next heads of the IMF and the
World Bank be selected through open merit-based processes,
irrespective of nationality or regional considerations.
We welcome the decision to broaden the membership of the
Financial Stability Forum (FSF) and invite as new members the
G20 countries that are not currently in the FSF.
We also welcome the expansion of the Basle Committee on
Banking Supervision announced today. The International
Accounting Standards Board and other standard setting bodies
also need to become more representative, reinforcing the
presence of emerging market economies.
We had a fruitful discussion on other actual
international financial issues and decided to enhance our
collaboration, including through greater exchange of
information, in light of deepening of the global crisis. We also
agreed to hold our next meeting in Istanbul prior to the 2009
Annual IMF and World Bank Meetings.
