##sed. a financial system that combines innovation and solidity, profit and support for households and firms will have to have more rules, more capital and less debt. the global strategy that is emerging is based on three pillars : the international financial institutions, the regulatory authorities and the central banks. the international monetary fund has taken on a crucial role ; its resources have been more than doubled and its ability to intervene has been enhanced. today the imf can support countries in difficulty, especially the emerging economies that are suffering most from the adverse economic cycle ; the fund ’ s assistance in managing imbalances is preventing the systemic propagation of the crisis. the imf, together with the financial stability board, has been entrusted with analysing and signalling threats to the stability of the global financial system. it is encouraging that the leading countries have at last accepted periodic imf examination of the soundness of their financial systems. more rigorous multilateral surveillance than in the past will contribute to the global consistency of national economic policies. but the orderly correction of current account imbalances will have to hinge on a world capital market that is fully functioning and free from defects in regulation and control. this belief underlies the establishment by the g20 heads of state and government of the financial stability board. the new body has a broadened membership and mandate by comparison with the financial stability forum ; in april 2008 the latter had produced the first report on the steps to be taken to overcome the shortcomings of regulation. the board is now responsible for monitoring national authorities in the application of those recommendations, coordinating the many committees of regulators and accountants that determine the standards for banks, and proceeding with the establishment of international colleges of supervisors for the largest financial institutions. more rigorous capital and liquidity requirements, the extension of the scope of regulation to non - bank institutions, the completion of basel ii and amendment of the accounting rules in order to reduce their procyclicality, and more demanding supervision and regulation for institutions whose size makes them a systemic risk ; these are the measures describing the path of the financial stability board ’ s work in the coming months. the italian presidency of the g8 is conducting the work to set global standards for the transparency, propriety and integrity of international economic and financial activity. the crisis has considerably broadened the consensus on the need for central banks to expressly include financial stability among their objectives ; restricting their task to taking corrective action after a crisis is no longer deemed sufficient. the idea is gaining ground

we need to think carefully, as of now, about how to make these developments fully compatible with the rights of individuals and about how to square the increasing availability of information on the private lives of each one of us in relation to our political views, state of health, or sexual orientation, with the protection of our personal freedom and with the rules that govern the functioning of a modern liberal democracy. j. m. keynes ( 1930 ) “ economic possibilities for our grandchildren ”, freely available online. designed and printed by the printing and publishing division of the bank of italy