is, how much is lost in terms of global stability by the exclusion of these countries? is their inclusion in the imf – albeit even there in a notional way – enough, or are they destined to continue to be excluded on the grounds that they are not systemically important? the financial stability forum attempts to function as a critical issues forum with representation beyond banking. this forum, despite its g7 focus includes a number of international financial regulatory organisations. it trys to project that it is not an arm of the bis, but is housed in bis. this comes closest to being a multipurpose oversight body, but lacks global representation, something which probably needs to be remedied if it wants to be considered a global body with the ability to speak to other countries with authority. this group therefore, by reporting to the imf is able to give itself some legitimacy. the report of the fsf of april 2008 on enhancing market and institutional resilience is an example of its work ; a good analysis with general recommendations with specific recommendations promised later. who, however will determine whether and how the recommendations are implemented is the key question? the imf? summary this paper attempted to analyse the international financial governance system, its strengths and weaknesses and in the course of the paper a number of issues were ventilated and a number of recommendations made. they include : - the need for clear rules and processes for securitisation and an oversight body whose authority is observed in this regard. - the need to better understand current approaches to measuring risk and to track risks in securitised loans and to improve the internal reporting systems in megabanks. - the need to revise incentive systems so they do not reward those who transfer risks to others. - focus on financial risk generally and not on bank risks in particular. - concretise measures of financial stability and develop international comparability. - conduct more in depth studies on financial system vulnerability to inflation. - develop a clearly defined role for a body with multiple financial oversight responsibilities and determine whether this is the fsf and if so deal with its global legitimacy. - develop more information on risk transfer mechanisms. - develop systems of forecasting liquidity needs which result from globalisation. - determine the split of responsibilities between the regulator which set the guidelines, the regulator which ensures compliance and the authority which finances bail - outs. - clarify the role of governments and guard against moral hazard of saving financial institutions at all costs. - ensure

##gs, do not end up being out of phase with the cycle, or having an undesirable longer - term impact on the equilibrium of public finances ). these conditions are not easy to stick to in practice. an intermediate possibility, of which professor blanchard is a proponent, is to make any non - automatic fiscal response to very large shocks not fully discretionary, i. e., to have specific measure triggered by pre - defined exceptional circumstances. the idea is not in fact totally new ; it dates back to one of the earliest paper on the subject ( musgrave and miller, 1948 ) : " the flexibility of the tax system might be 1 / 5 bis - central bankers'speeches increased if provision was made for automatic adjustment in tax rates with changes in income but this could hardly be called built - in flexibility in the usual sense of the term ". however, it has been explored more rigorously in recent years ( e. g. eichenbaum, 2019 ; blanchard and summers, 2020 and boushey et al., 2019 ). basically, the idea consists in changing the parameters of fiscal policy ( e. g. the generosity of the unemployment benefit scheme or the tax rates ) for a period of time, when one or more business - cycle indicators ( like the unemployment rate or the output gap ) exceed certain thresholds. this approach reduces the distortions and delays typically implied in fully discretionary measures. one can think of several objections. defining appropriate indicators and thresholds, for instance, may be tricky, both on theoretical and practical grounds. ( professor blanchard discusses certain key details in his joint 2020 paper ). issues of statistical measurement may arise. the possibility of ex - post tampering with duration and parameters may reintroduce some of the problems inherent in pure discretionary action. various potential practical pitfalls will have to be taken into account. still, i understand that an arrangement of this type is actually in place at least in the case the us unemployment benefits scheme. it might be useful to explore the possibility of making use of a similar arrangement in a supranational context, with an open mind and a very pragmatic attitude. fiscal rules fiscal rules in a monetary union are needed to ensure the stability of the area by preventing harmful spillovers caused by public - finance tensions in member states. for this reason, members are required to pursue sound forward - looking fiscal strategies to guarantee long - term sustainability. this will make public finances