G 20 FINANCE MEETING Christine Lagarde Christian Noyer

G 20 FINANCE MEETING Christine Lagarde Christian Noyer 14 -15 April 2011 – Washington DC Réunion des ministres des finances et des gouverneurs des banques centrales du G 20 Finance Ministers and Central Bank Governors’ Meeting 18 -19 février 2011 18 -19 February 2011

The G 20 Finance Meeting accounts for 85% of the global economy Equatorial Guinea

New ideas for a new world Priorities of the French presidency of the G 20 • 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 18 - 19 février Washington 14 – 15 avril Paris 13 - 14 octobre Cannes Summit 3– 4 November

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 G 20 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 G 20 responses to commodity price volatility 5. Reaffirm the G 20'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… Déséquilibres courants des pays du G 20 (en % du PIB mondial) 2. 0% 1. 5% Etats-Unis Royaume-Uni Turquie Afrique du Sud 1. 0% Arabie Saoudite Russie 0. 5% Mexique Corée du Sud 0. 0% Japon Italie -0. 5% Indonésie Inde -1. 0% Allemagne France -1. 5% Chine -2. 0% Canada -2. 5% Australie 10 20 09 20 08 Argentine 20 07 20 06 20 05 20 04 20 03 20 02 20 01 20 00 20 99 19 98 19 97 19 96 19 95 19 94 19 93 19 92 19 91 19 19 90 Brésil

…and agree on indicative guidelines… Agreement on a set of indicators in February in Paris • • • 8 Discussions during Washington G 20 Public debt and fiscal deficit; Finance meeting 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. • Defining the indicative guidelines with stricter criteria for Titre de la présentation

…in order to improve coordination for growth Improving the Framework for Strong, Sustainable and Balanced Growth Agreement on indicators for assessing major imbalances (February) 9 Titre de la présentation Identification of imbalances with the help of indicative guidelines An ambitious action plan : - Reducing imbalances - Supporting growth

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 What we plan 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 do not intend to do: • Going back to fixed exchange rates • Questioning the role of the dollar • Introducing widespread capital controls 11

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

2. 1. Reduce the need to accumulate reserves Accumulating reserves is costly • For the country concerned (opportunity cost) • For the global economy (source of imbalances) Areas of focus: improving liquidity supply in times of crisis 13 • 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 Titre de la présentation • Development of local currency financial markets

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 Areas for discussion 14 • 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 Titre de la présentation • to identify economic policy coordination patterns which are

2. 3. Ensuring the emergence of new international currencies A risky transition New economic focal points New international currencies Possible solutions • Careful planning of the inclusion of new currencies in the 15 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 Titre de laeconomies présentation

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 Imperfect markets • 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 What we plan to do • 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

3. Commodity price volatility – G 20 Finance meeting Washington Energy • Support the JODI oil database and efforts on price-setting Food security agencies • Discussions of the report by international organizations on agricultural and food commodity price volatility, and on Regulation of commodity derivatives hedging and risk management tools 18 • Assessment of the work on regulation and supervision of commodity derivatives, to prepare concrete recommendations Titre de lafor the G 20 présentation

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 Goal • Harmonized and effective implementation of the commitments made by the G 20 What we plan to do • 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

4. Ensure comprehensive financial regulation Goal • Protect citizens, the financial system and the real economy against systemic risk What we plan to do: • 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 21

4. Financial regulation G 20 Finance meeting Washington Governance of the Financial Stability Board (FSB) risk • Systemic Evaluation of the FSB's proposals concerning its governance and resources • Continue efforts to identify systemic financial institutions and the higher loss absorbency measures to apply to them efforts • Continued Define the scope of the shadow banking sector • Monitor implementation of compensation policies standards • Support the convergence of accounting standards 22 Titre de la présentation

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

5. Meeting our commitments towards development and the fight against climate change Goal • Mobilize financing for development and for the fight against climate change What we plan to do • 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