In this report, FedFin assesses the G-20 declaration at the close of the St. Petersburg summit on Friday. As usual, the declaration is replete with pledges to do the close-to-impossible – e.g., to ensure recovery and financial stability all at the same time. With regard to financial regulation, similarly sanguine promises include one to ensure regulatory coordination, a commitment FedFin understands was forced into the communiqué in hopes it would persuade the CFTC to give on substitutive compliance and push the FRB to back down on the pending foreign-bank rule (see FSM Report SYSTEMIC64). However, other pledges, while cloaked in careful prose, are meaningful global commitments to avoid problems like exchange rates set largely for competitive purposes. A new initiative in the declaration covers investment policy, with the G-20 now planning a year-long initiative designed to improve private capital flows, especially with regard to infrastructure and support of small/medium-sized business. With regard to financial regulation, key commitments include a review of financial regulation to determine how it affects the new investment goals, a demand for action next year to set capital and prudential standards for large insurance companies, and instructions to IOSCO and others to specify which nonbanks are SIFIs through a methodology due out by year-end, 2013. The communiqué stands by all the new shadow rules (see FSM Report SHADOW7), but not with the specificity some nations sought.
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