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IMF Survey Vol.30, No.9 May 2001
Article

Group of 10: Participants discuss financial sector consolidation

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 2001
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The finance ministers and central bank governors of the countries of the Group of 10 met in Washington on April 29, 2001. The meeting was chaired by Hans Eichel, the Minister of Finance of Germany and current Chair of the Group of 10. Ministers and governors took note of reports from Henk Brouwer, Chair of the Deputies of the Group of 10; Mario Draghi, Chair of Working Party No. 3 of the Organization for Economic Cooperation and Development; and Andrew Crockett, General Manager of the Bank for International Settlements.

Ministers and governors exchanged views on the implications of consolidation in the financial sector. They noted that, as a result of the noticeable acceleration in consolidation activity in the last few years, a number of large, and in some cases increasingly complex, financial institutions have been created. Existing policies appear adequate to contain individual firm and systemic risks now and in the intermediate term. However, consolidation may increase the challenges that could arise if a large and complex financial organization encountered serious financial difficulties. These challenges are heightened by the fact that insolvency arrangements differ markedly across countries. For these reasons, ministers and governors stressed the need for ongoing, close cooperation and communication among the competent authorities, both across sectors and across borders. They also underscored the need to evaluate steps that could be taken to improve legal and institutional arrangements in order to make the global financial system more robust and efficient.

Ministers and governors discussed structural issues relating to asset price movements and their implications for global financial stability. They underlined the need for a better understanding of the fundamental factors driving asset prices. They noted the role of information, expectations, and market dynamics in influencing asset prices, and they underscored the importance of transparency and the provision of timely, relevant, and accurate information for facilitating the proper assessment of risk and the determination of asset values. Ministers and governors encouraged efforts in all forums that seek to make the financial sector more resilient to movements in asset prices through the pursuit of sound macroeconomic policies and the adoption of coherent structural policies. In particular, they considered it useful to evaluate the effects of structural policies on asset price determination.

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