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G20 had 'no game plan': Callaghan

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By James Mitchell
  •  
3 minute read

The Group of Twenty (G20) forum for international economic cooperation and decision-making was formed with "no clear game plan" for financial systems regulation.

Speaking at the ASIC Annual Forum in Sydney on Monday, Lowy Institute G20 Studies Centre director Mike Callaghan said the G20 started out in the direction towards financial regulation, but without a clear idea of what that direction would be. 

"It didn’t start with a clear blueprint or a clear game plan of ‘this is the financial system we want, this is how we are going to regulate it, and this is what the direction will be’,” he said.

“It came out of the GFC and a whole lot of political pressure from politicians to be seen to be doing something,” Mr Callahan said.

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“In terms of the first G20 summit that took place in Washington in November 2008, it was less than three weeks of preparation and it was a real need to be seen to be responding,” he said.

“What came out of that was 47 actionable items, 43 of them were detailed recommendations to toughen up on the financial sector.”

At the time it is doubtful that anyone had a full comprehension of what the consequences would be, Mr Callahan said.

“I don’t think anyone had any concept of what the consequences would be of all these reforms, requirements increasing, the toughening up of international standards,” he said.

Mr Callahan made reference to IMF chief economist Olivier Blanchard’s comments from 2012 in which he stated that the G20 was “regulating blind”. 

“There was a general idea of where you wanted to go; you wanted more capital requirements, you wanted a safer system, you clearly wanted to have a less integrated system and less systemic risk,” Mr Callahan said.

“This is just a fact of life.”

Mr Callahan said there is now a “governance gap” that must be filled in order for the G20 to achieve its goals.

“This is what the G20 should be focusing on, particularly at a political level, but I don’t think that is what’s happening now,” he said.

G20 had 'no game plan': Callaghan

The Group of Twenty (G20) forum for international economic cooperation and decision-making was formed with "no clear game plan" for financial systems regulation.

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