g7 to discuss big reform package today

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    G7 to discuss big reform package today


    (BizWorld)

    Fuller disclosure by banks of risks is among the reforms sought by a package of measures to be put before G7 ministers in Washington later today.

    The ministers are to be asked to approve the package, which seeks to prevent a repeat of the credit cruch that has engulfed world markets.
    The package, which has a reported 65 recommendations, has been put together by a high level group called the Financial Stability Forum.


    It also seeks tougher standards for credit rating agencies to apply, requiring them to differentiate their ratings for complex securities and provide more information about how they come up with their decisions.

    Some analysts blame such agencies for tempting investors into risky securities tied to the high-risk subprime US market because of high-quality ratings.

    The package being put before ministers also proposes measures to be taken central banks to ensure they can successfully pump cash into the system at times of stress. They would also boost cooperation and information exchanges between such banks and market authorities.

    Indications ahead of today's meeting are that most G7 members already accept the proposals.

    The G7 is made up of the the United States, Britain, Canada, France, Germany, Italy and Japan. There is also to be a further move today in parallel with the G7 meeting to encourage private sector banks to loosen up again on lending to each other, so as to get the global financial system back to normal.

    A group of bankers has been invited to a dinner tonight at the U.S. Treasury, shortly after the expected communique on the outcome of the G7 around 6:30 p.m. Washington time.

    US Treasury Secretary Henry Paulson has already stated his position ahead of today's talks that he wants banks to be ready to play their role as a market stabiliser.

    "If you think you're going to need capital, don't be looking for the government to help you," he said. "If you think you need capital, go raise it."

    The Financial Stability Forum, which drew up the G7 package, has representatives of 26 bodies including central banks, the IMF and World Bank, as well as market regulators from various large economies.

    It is based at the Bank of International Settlements in Switzerland
 
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