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G20 regulatory efforts must be transparent, include civil society

Transparency International (TI), the leading anti-corruption organisation, calls on the Group of 20 finance ministers and central bankers meeting this weekend in St. Andrews, Scotland, to include civil society in the new regulatory and oversight institutions to ensure a safer and more responsible global banking system.

“With this crisis, trust in financial markets vanished and confidence in public regulators was destroyed. Rebuilding with integrity means applying transparency, demonstrating accountability and taking the views of civil society fully into account,” said Cobus de Swardt, Managing Director, Transparency International.

TI welcomed G20 promises in April to tackle opacity as well as the establishment of a new global oversight body in the form of the Financial Stability Board (FSB) and called for civil society representation in that group. Currently, there are no available venues for civil society to engage in discussions with the leadership of the FSB or the International Monetary Fund (IMF), which have emerged as the key international institutions responsible for setting parameters for risk and adjusting the regulatory framework in order to avert future crisis.

“It is imperative that the FSB’s governance structure be transparent. Its analysis and recommendations must be made public in a timely way,” said de Swardt. “Ultimately, this framework is about systems that are accountable to citizens and as such they require a formal, systemic approach for engaging with civil society.”

With the important issue of climate change and the public subsidies it will involve on the agenda, TI urges the G20 to take into account the corruption risks in climate change governance and consider integrity measures suitable for corresponding frameworks.

Thorough reform is essential to address one of the key elements leading to this crisis: a reckless endeavour to make short-term gains while operating in ungoverned black holes beset with conflicts of interest. A partial recovery cannot become a sustainable one unless these issues are addressed.

TI’s recommendations to G20 finance ministers are:

  • Financial Stability Board (FSB): The FSB should regularly consult civil society on all financial reforms considered, and implement a process for new reform proposals by civil society.
  • Offshore financial centres: Finance ministers should agree on a common framework through which their financial institutions would sever their links with financial centres that do not cooperate with OECD-backed exchange of information.
  • Additional lending by Multilateral Development Banks: Anti-corruption programmes must be built-in and implemented for all projects funded, particularly in the case of fast-tracked disbursements.
  • Framework for Strong, Sustainable and Balanced Growth: Obtain civil society input to complement engagement with the IMF and the World Bank, and regularly report on progress made.
  • Climate change: Establish measures to ensure that public subsidies to cleaner energy sources will be distributed through a transparent process and publicly disclosed.
  • Exit strategies from stimulus and rescue packages: Ensure that exits, as well as ongoing stimulus and rescue measures are managed in a fair and transparent manner. Governments should establish credible, non-arbitrary measures, and not withdraw support from one sector or corporation while maintaining assistance to another unless there is a clear and explicit rationale that is publicly communicated.
  • Compensation practices: Enforce the Financial Stability Board standards for sound compensation practice in each G20 country.
  • ‘Too big to fail’ financial institutions: These corporations must be covered by stronger prudential standards and regulatory requirements in each country during the course of 2010 and not wait, as currently envisaged, until the end of October 2010 for the first Financial Stability Board report on the topic to take action.
  • Over the counter derivatives: The process towards centrally cleared trading of all derivatives must be accelerated, to avoid a deadline that exceeds three years as currently planned. Instead, the deadline should be 18 months from now, in order to ensure that citizens do not face prolonged financial risk.

For further information about TI’s work to counter the crisis, please click here.

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Transparency International is the civil society organisation leading the fight against corruption


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Gypsy Guillén Kaiser
T: +49 30 34 38 20662
E: press@transparency.org