DECLARATION 

SUMMIT ON FINANCIAL MARKETS AND THE WORLD ECONOMY 

November 15, 2008 

1. We, the Leaders of the Group of Twenty, held an initial meeting in Washington on 

November 15, 2008, amid serious challenges to the world economy and financial 

markets. We are determined to enhance our cooperation and work together to restore 

global growth and achieve needed reforms in the world’s financial systems. 

2. Over the past months our countries have taken urgent and exceptional measures to 

support the global economy and stabilize financial markets. These efforts must continue. 

At the same time, we must lay the foundation for reform to help to ensure that a global 

crisis, such as this one, does not happen again. Our work will be guided by a shared 

belief that market principles, open trade and investment regimes, and effectively 

regulated financial markets foster the dynamism, innovation, and entrepreneurship that 

are essential for economic growth, employment, and poverty reduction. 

Root Causes of the Current Crisis

3. During a period of strong global growth, growing capital flows, and prolonged 

stability earlier this decade, market participants sought higher yields without an adequate 

appreciation of the risks and failed to exercise proper due diligence. At the same time, 

weak underwriting standards, unsound risk management practices, increasingly complex 

and opaque financial products, and consequent excessive leverage combined to create 

vulnerabilities in the system. Policy-makers, regulators and supervisors, in some 

advanced countries, did not adequately appreciate and address the risks building up in 

financial markets, keep pace with financial innovation, or take into account the systemic 

ramifications of domestic regulatory actions. 

4. Major underlying factors to the current situation were, among others, inconsistent and 

insufficiently coordinated macroeconomic policies, inadequate structural reforms, which 

led to unsustainable global macroeconomic outcomes. These developments, together, 

contributed to excesses and ultimately resulted in severe market disruption. 

Actions Taken and to Be Taken

5. We have taken strong and significant actions to date to stimulate our economies, 

provide liquidity, strengthen the capital of financial institutions, protect savings and 

deposits, address regulatory deficiencies, unfreeze credit markets, and are working to 

ensure that international financial institutions (IFIs) can provide critical support for the 

global economy. 

6. But more needs to be done to stabilize financial markets and support economic 

growth. Economic momentum is slowing substantially in major economies and the 

global outlook has weakened. Many emerging market economies, which helped sustain 

1
the world economy this decade, are still experiencing good growth but increasingly are 

being adversely impacted by the worldwide slowdown. 

7. Against this background of deteriorating economic conditions worldwide, we agreed 

that a broader policy response is needed, based on closer macroeconomic cooperation, to 

restore growth, avoid negative spillovers and support emerging market economies and 

developing countries. As immediate steps to achieve these objectives, as well as to 

address longer-term challenges, we will: 

• Continue our vigorous efforts and take whatever further actions are necessary to 

stabilize the financial system. 

• Recognize the importance of monetary policy support, as deemed appropriate to 

domestic conditions. 

• Use fiscal measures to stimulate domestic demand to rapid effect, as appropriate, 

while maintaining a policy framework conducive to fiscal sustainability. 

• Help emerging and developing economies gain access to finance in current difficult 

financial conditions, including through liquidity facilities and program support. We 

stress the International Monetary Fund’s (IMF) important role in crisis response, 

welcome its new short-term liquidity facility, and urge the ongoing review of its 

instruments and facilities to ensure flexibility. 

• Encourage the World Bank and other multilateral development banks (MDBs) to use 

their full capacity in support of their development agenda, and we welcome the recent 

introduction of new facilities by the World Bank in the areas of infrastructure and 

trade finance. 

• Ensure that the IMF, World Bank and other MDBs have sufficient resources to 

continue playing their role in overcoming the crisis. 

Common Principles for Reform of Financial Markets

8. In addition to the actions taken above, we will implement reforms that will strengthen 

financial markets and regulatory regimes so as to avoid future crises. Regulation is first 

and foremost the responsibility of national regulators who constitute the first line of 

defense against market instability. However, our financial markets are global in scope, 

therefore, intensified international cooperation among regulators and strengthening of 

international standards, where necessary, and their consistent implementation is 

necessary to protect against adverse cross-border, regional and global developments 

affecting international financial stability. Regulators must ensure that their actions 

support market discipline, avoid potentially adverse impacts on other countries, including 

regulatory arbitrage, and support competition, dynamism and innovation in the 

marketplace. Financial institutions must also bear their responsibility for the turmoil and 

should do their part to overcome it including by recognizing losses, improving disclosure 

and strengthening their governance and risk management practices. 

2
9. We commit to implementing policies consistent with the following common principles 

for reform. 

• Strengthening Transparency and Accountability: We will strengthen financial 

market transparency, including by enhancing required disclosure on complex 

financial products and ensuring complete and accurate disclosure by firms of their 

financial conditions. Incentives should be aligned to avoid excessive risk-taking. 

• Enhancing Sound Regulation: We pledge to strengthen our regulatory regimes, 

prudential oversight, and risk management, and ensure that all financial markets, 

products and participants are regulated or subject to oversight, as appropriate to their 

circumstances. We will exercise strong oversight over credit rating agencies, 

consistent with the agreed and strengthened international code of conduct. We will 

also make regulatory regimes more effective over the economic cycle, while ensuring 

that regulation is efficient, does not stifle innovation, and encourages expanded trade 

in financial products and services. We commit to transparent assessments of our 

national regulatory systems. 

• Promoting Integrity in Financial Markets: We commit to protect the integrity of 

the world’s financial markets by bolstering investor and consumer protection, 

avoiding conflicts of interest, preventing illegal market manipulation, fraudulent 

activities and abuse, and protecting against illicit finance risks arising from noncooperative jurisdictions. We will also promote information sharing, including with 

respect to jurisdictions that have yet to commit to international standards with respect 

to bank secrecy and transparency. 

• Reinforcing International Cooperation: We call upon our national and regional 

regulators to formulate their regulations and other measures in a consistent manner. 

Regulators should enhance their coordination and cooperation across all segments of 

financial markets, including with respect to cross-border capital flows. Regulators 

and other relevant authorities as a matter of priority should strengthen cooperation on 

crisis prevention, management, and resolution. 

• Reforming International Financial Institutions: We are committed to advancing 

the reform of the Bretton Woods Institutions so that they can more adequately reflect 

changing economic weights in the world economy in order to increase their 

legitimacy and effectiveness. In this respect, emerging and developing economies, 

including the poorest countries, should have greater voice and representation. The 

Financial Stability Forum (FSF) must expand urgently to a broader membership of 

emerging economies, and other major standard setting bodies should promptly review 

their membership. The IMF, in collaboration with the expanded FSF and other 

bodies, should work to better identify vulnerabilities, anticipate potential stresses, and 

act swiftly to play a key role in crisis response.

3
Tasking of Ministers and Experts

10. We are committed to taking rapid action to implement these principles. We instruct 

our Finance Ministers, as coordinated by their 2009 G-20 leadership (Brazil, UK, 

Republic of Korea), to initiate processes and a timeline to do so. An initial list of specific 

measures is set forth in the attached Action Plan, including high priority actions to be 

completed prior to March 31, 2009. 

In consultation with other economies and existing bodies, drawing upon the 

recommendations of such eminent independent experts as they may appoint, we request 

our Finance Ministers to formulate additional recommendations, including in the 

following specific areas: 

• Mitigating against pro-cyclicality in regulatory policy; 

• Reviewing and aligning global accounting standards, particularly for complex 

securities in times of stress; 

• Strengthening the resilience and transparency of credit derivatives markets and 

reducing their systemic risks, including by improving the infrastructure of over-thecounter markets; 

• Reviewing compensation practices as they relate to incentives for risk taking and 

innovation; 

• Reviewing the mandates, governance, and resource requirements of the IFIs; and 

• Defining the scope of systemically important institutions and determining their 

appropriate regulation or oversight. 

11. In view of the role of the G-20 in financial systems reform, we will meet again by 

April 30, 2009, to review the implementation of the principles and decisions agreed 

today. 

Commitment to an Open Global Economy

12. We recognize that these reforms will only be successful if grounded in a commitment 

to free market principles, including the rule of law, respect for private property, open 

trade and investment, competitive markets, and efficient, effectively regulated financial 

systems. These principles are essential to economic growth and prosperity and have 

lifted millions out of poverty, and have significantly raised the global standard of living. 

Recognizing the necessity to improve financial sector regulation, we must avoid overregulation that would hamper economic growth and exacerbate the contraction of capital 

flows, including to developing countries. 

13. We underscore the critical importance of rejecting protectionism and not turning 

inward in times of financial uncertainty. In this regard, within the next 12 months, we 

will refrain from raising new barriers to investment or to trade in goods and services, 

imposing new export restrictions, or implementing World Trade Organization (WTO) 

inconsistent measures to stimulate exports. Further, we shall strive to reach agreement 

4
this year on modalities that leads to a successful conclusion to the WTO’s Doha 

Development Agenda with an ambitious and balanced outcome. We instruct our Trade 

Ministers to achieve this objective and stand ready to assist directly, as necessary. We 

also agree that our countries have the largest stake in the global trading system and 

therefore each must make the positive contributions necessary to achieve such an 

outcome. 

14. We are mindful of the impact of the current crisis on developing countries, 

particularly the most vulnerable. We reaffirm the importance of the Millennium 

Development Goals, the development assistance commitments we have made, and urge 

both developed and emerging economies to undertake commitments consistent with their 

capacities and roles in the global economy. In this regard, we reaffirm the development 

principles agreed at the 2002 United Nations Conference on Financing for Development 

in Monterrey, Mexico, which emphasized country ownership and mobilizing all sources 

of financing for development. 

15. We remain committed to addressing other critical challenges such as energy security 

and climate change, food security, the rule of law, and the fight against terrorism, poverty 

and disease. 

16. As we move forward, we are confident that through continued partnership, 

cooperation, and multilateralism, we will overcome the challenges before us and restore 

stability and prosperity to the world economy. 

5
Action Plan to Implement Principles for Reform

This Action Plan sets forth a comprehensive work plan to implement the five agreed 

principles for reform. Our finance ministers will work to ensure that the taskings set 

forth in this Action Plan are fully and vigorously implemented. They are responsible for 

the development and implementation of these recommendations drawing on the ongoing 

work of relevant bodies, including the International Monetary Fund (IMF), an expanded 

Financial Stability Forum (FSF), and standard setting bodies. 

Strengthening Transparency and Accountability 

Immediate Actions by March 31, 2009 

• The key global accounting standards bodies should work to enhance guidance for 

valuation of securities, also taking into account the valuation of complex, illiquid 

products, especially during times of stress. 

• Accounting standard setters should significantly advance their work to address 

weaknesses in accounting and disclosure standards for off-balance sheet vehicles. 

• Regulators and accounting standard setters should enhance the required disclosure of 

complex financial instruments by firms to market participants. 

• With a view toward promoting financial stability, the governance of the international 

accounting standard setting body should be further enhanced, including by 

undertaking a review of its membership, in particular in order to ensure transparency, 

accountability, and an appropriate relationship between this independent body and the 

relevant authorities. 

• Private sector bodies that have already developed best practices for private pools of 

capital and/or hedge funds should bring forward proposals for a set of unified best 

practices. Finance Ministers should assess the adequacy of these proposals, drawing 

upon the analysis of regulators, the expanded FSF, and other relevant bodies. 

Medium-term actions 

• The key global accounting standards bodies should work intensively toward the 

objective of creating a single high-quality global standard. 

• Regulators, supervisors, and accounting standard setters, as appropriate, should work 

with each other and the private sector on an ongoing basis to ensure consistent 

application and enforcement of high-quality accounting standards. 

• Financial institutions should provide enhanced risk disclosures in their reporting and 

disclose all losses on an ongoing basis, consistent with international best practice, as 

appropriate. Regulators should work to ensure that a financial institution’ financial 

statements include a complete, accurate, and timely picture of the firm’s activities 

(including off-balance sheet activities) and are reported on a consistent and regular 

basis. 

1
Enhancing Sound Regulation 

Regulatory Regimes 

Immediate Actions by March 31, 2009 

• The IMF, expanded FSF, and other regulators and bodies should develop 

recommendations to mitigate pro-cyclicality, including the review of how valuation 

and leverage, bank capital, executive compensation, and provisioning practices may 

exacerbate cyclical trends. 

Medium-term actions 

• To the extent countries or regions have not already done so, each country or region 

pledges to review and report on the structure and principles of its regulatory system to 

ensure it is compatible with a modern and increasingly globalized financial system. 

To this end, all G-20 members commit to undertake a Financial Sector Assessment 

Program (FSAP) report and support the transparent assessments of countries’ national 

regulatory systems. 

• The appropriate bodies should review the differentiated nature of regulation in the 

banking, securities, and insurance sectors and provide a report outlining the issue and 

making recommendations on needed improvements. A review of the scope of 

financial regulation, with a special emphasis on institutions, instruments, and markets 

that are currently unregulated, along with ensuring that all systemically-important 

institutions are appropriately regulated, should also be undertaken. 

• National and regional authorities should review resolution regimes and bankruptcy 

laws in light of recent experience to ensure that they permit an orderly wind-down of 

large complex cross-border financial institutions. 

• Definitions of capital should be harmonized in order to achieve consistent measures 

of capital and capital adequacy. 

Prudential Oversight

Immediate Actions by March 31, 2009 

• Regulators should take steps to ensure that credit rating agencies meet the highest 

standards of the international organization of securities regulators and that they avoid 

conflicts of interest, provide greater disclosure to investors and to issuers, and 

differentiate ratings for complex products. This will help ensure that credit rating 

agencies have the right incentives and appropriate oversight to enable them to 

perform their important role in providing unbiased information and assessments to 

markets. 

• The international organization of securities regulators should review credit rating 

agencies’ adoption of the standards and mechanisms for monitoring compliance. 

• Authorities should ensure that financial institutions maintain adequate capital in 

amounts necessary to sustain confidence. International standard setters should set out 

strengthened capital requirements for banks’ structured credit and securitization 

activities. 

2
• Supervisors and regulators, building on the imminent launch of central counterparty 

services for credit default swaps (CDS) in some countries, should: speed efforts to 

reduce the systemic risks of CDS and over-the-counter (OTC) derivatives 

transactions; insist that market participants support exchange traded or electronic 

trading platforms for CDS contracts; expand OTC derivatives market transparency; 

and ensure that the infrastructure for OTC derivatives can support growing volumes. 

Medium-term actions 

• Credit Ratings Agencies that provide public ratings should be registered. 

• Supervisors and central banks should develop robust and internationally consistent 

approaches for liquidity supervision of, and central bank liquidity operations for, 

cross-border banks. 

Risk Management 

Immediate Actions by March 31, 2009 

• Regulators should develop enhanced guidance to strengthen banks’ risk management 

practices, in line with international best practices, and should encourage financial 

firms to reexamine their internal controls and implement strengthened policies for 

sound risk management. 

• Regulators should develop and implement procedures to ensure that financial firms 

implement policies to better manage liquidity risk, including by creating strong 

liquidity cushions. 

• Supervisors should ensure that financial firms develop processes that provide for 

timely and comprehensive measurement of risk concentrations and large counterparty 

risk positions across products and geographies. 

• Firms should reassess their risk management models to guard against stress and report 

to supervisors on their efforts. 

• The Basel Committee should study the need for and help develop firms’ new stress 

testing models, as appropriate. 

• Financial institutions should have clear internal incentives to promote stability, and 

action needs to be taken, through voluntary effort or regulatory action, to avoid 

compensation schemes which reward excessive short-term returns or risk taking. 

• Banks should exercise effective risk management and due diligence over structured 

products and securitization. 

Medium -term actions 

• International standard setting bodies, working with a broad range of economies and 

other appropriate bodies, should ensure that regulatory policy makers are aware and 

able to respond rapidly to evolution and innovation in financial markets and products. 

• Authorities should monitor substantial changes in asset prices and their implications 

for the macroeconomy and the financial system. 

3
Promoting Integrity in Financial Markets 

Immediate Actions by March 31, 2009 

• Our national and regional authorities should work together to enhance regulatory 

cooperation between jurisdictions on a regional and international level. 

• National and regional authorities should work to promote information sharing about 

domestic and cross-border threats to market stability and ensure that national (or 

regional, where applicable) legal provisions are adequate to address these threats. 

• National and regional authorities should also review business conduct rules to protect 

markets and investors, especially against market manipulation and fraud and 

strengthen their cross-border cooperation to protect the international financial system 

from illicit actors. In case of misconduct, there should be an appropriate sanctions 

regime.

Medium -term actions 

• National and regional authorities should implement national and international 

measures that protect the global financial system from uncooperative and nontransparent jurisdictions that pose risks of illicit financial activity.

• The Financial Action Task Force should continue its important work against money 

laundering and terrorist financing, and we support the efforts of the World Bank - UN 

Stolen Asset Recovery (StAR) Initiative.

• Tax authorities, drawing upon the work of relevant bodies such as the Organization 

for Economic Cooperation and Development (OECD), should continue efforts to 

promote tax information exchange. Lack of transparency and a failure to exchange 

tax information should be vigorously addressed.

Reinforcing International Cooperation 

Immediate Actions by March 31, 2009 

• Supervisors should collaborate to establish supervisory colleges for all major crossborder financial institutions, as part of efforts to strengthen the surveillance of crossborder firms. Major global banks should meet regularly with their supervisory 

college for comprehensive discussions of the firm’s activities and assessment of the 

risks it faces. 

• Regulators should take all steps necessary to strengthen cross-border crisis 

management arrangements, including on cooperation and communication with each 

other and with appropriate authorities, and develop comprehensive contact lists and 

conduct simulation exercises, as appropriate. 

Medium -term actions 

• Authorities, drawing especially on the work of regulators, should collect information 

on areas where convergence in regulatory practices such as accounting standards, 

auditing, and deposit insurance is making progress, is in need of accelerated progress, 

or where there may be potential for progress. 

4
• Authorities should ensure that temporary measures to restore stability and confidence 

have minimal distortions and are unwound in a timely, well-sequenced and 

coordinated manner. 

Reforming International Financial Institutions 

Immediate Actions by March 31, 2009 

• The FSF should expand to a broader membership of emerging economies. 

• The IMF, with its focus on surveillance, and the expanded FSF, with its focus on 

standard setting, should strengthen their collaboration, enhancing efforts to better 

integrate regulatory and supervisory responses into the macro-prudential policy 

framework and conduct early warning exercises. 

• The IMF, given its universal membership and core macro-financial expertise, should, 

in close coordination with the FSF and others, take a leading role in drawing lessons 

from the current crisis, consistent with its mandate. 

• We should review the adequacy of the resources of the IMF, the World Bank Group 

and other multilateral development banks and stand ready to increase them where 

necessary. The IFIs should also continue to review and adapt their lending 

instruments to adequately meet their members’ needs and revise their lending role in 

the light of the ongoing financial crisis.

• We should explore ways to restore emerging and developing countries’ access to 

credit and resume private capital flows which are critical for sustainable growth and 

development, including ongoing infrastructure investment. 

• In cases where severe market disruptions have limited access to the necessary 

financing for counter-cyclical fiscal policies, multilateral development banks must 

ensure arrangements are in place to support, as needed, those countries with a good 

track record and sound policies. 

Medium -term actions 

• We underscored that the Bretton Woods Institutions must be comprehensively 

reformed so that they can more adequately reflect changing economic weights in the 

world economy and be more responsive to future challenges. Emerging and 

developing economies should have greater voice and representation in these 

institutions. 

• The IMF should conduct vigorous and even-handed surveillance reviews of all 

countries, as well as giving greater attention to their financial sectors and better 

integrating the reviews with the joint IMF/World Bank financial sector assessment 

programs. On this basis, the role of the IMF in providing macro-financial policy 

advice would be strengthened. 

• Advanced economies, the IMF, and other international organizations should provide 

capacity-building programs for emerging market economies and developing countries 

on the formulation and the implementation of new major regulations, consistent with 

international standards. 

5