G20 report urges more financial risk prevention

Fri Mar 27, 2009 4:17pm EDT
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By David Ljunggren

OTTAWA (Reuters) - The final report of a G20 working group on financial regulation recommends that banks build up their capital reserves during good times and that regulators take a firm and comprehensive system-wide approach to risk prevention.

The report, handed out to journalists in Ottawa on Friday, contains 25 recommendations for improving financial system regulation at the national and global levels.

"More needs to be done to guard against excessive risk-taking, to avoid regulatory gaps, and to prevent the type of escalating credit growth that fed the current crisis," the report said.

The group, which Canada co-chaired with India, was one of four charged with coming up with ideas to present to a Group of 20 nations summit in London next week on how to prevent future global crises.

"There were regulatory failures, there were failures in the private sector, there were failures in risk management, there were failures in boards and there is need for real change," a senior Canadian official told a briefing.

"And I think this report, together with the work done by a number of international bodies, provides a very sound basis to move forward."

The report says:

* each country's regulation of individual institutions should also include a system-wide approach that prevents the build-up of excess risks. This will require strong coordination among regulatory bodies within each country, while financial authorities from different nations should meet to assess global risks and coordinate the responses.   Continued...