G20 Summit concludes reformation in strategy and financial help from governments

In the recent G20 summit held in Cannes, France, the Financial Stability Board has lined out a new plan to divert the recent debt crisis in Europe.

The group issued a list of 29 Global financial institutions to reshape their strategies in order to overcome economic ordeal that looms over their head.

These institutes include eight US banks, seventeen European banks, three from Japan and one from China. The reason for including these financial giants into the fold is simple; they are so closely knit together that if one falls, the others don’t have the
audacity to overcome the catastrophe.

The new plan suggests that the institutes should turn to their respective governments for public solvency but not in the same way US banks did in 2008 to avoid the financial crisis, which eventually big-banged and engulfed the entire globe.

The summit also agreed to induce new measures in order to reduce the risk of the solvency of Global Systemically Important Financial Institutions (G-SIFI). These measures are laid out as:

“Financial institutions whose distress or disorderly failure, because of their size, complexity and systemic interconnectedness, would cause significant disruption to the wider financial system and economic activity. To avoid this outcome, authorities have
all too frequently had no choice but to forestall the failure of such institutions through public solvency support. As underscored by this crisis, this has deleterious consequences for private incentives and for public finances.”

US president Barack Obama along with his counterparts from France, Nicolas Sarkozy, and Germany, Angela Merkel, seconded the concluding suggestion of the summit to support the Europe disaster and bailout Greece.

However, the G20 summit also urged the governments for relaxation in regulations imposed on these banks to reduce the risk of reduction of their lending capacity and liquidation of financial assets.

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Posted by Usman Khalid on Nov 5 2011. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry