Christian Noyer: The G20 and the role of emerging markets in the new financial architecture Opening speech by Mr Christian Noyer, Governor of the Bank of France, of the Session “The G20 and the role of emerging markets in the new financial architecture”, at the Money and banking conference 2009, Central Bank of Argentina, Buenos Aires, 31 August-1 September 2009. *  *  *  I am delighted to introduce this final session devoted to the lessons learned from the crisis regarding the international financial architecture and the role of emerging markets in this new configuration. The strong and rapid transmission of the crisis from the United States to other industrialised countries, and subsequently to emerging countries, has clearly highlighted the contrast between: -  on the one hand, the heightened exposure of the international economic and financial system to the risk of systemic crisis, due to the increased interdependence between players of developed and emerging economies and financial systems. -  and, on the other hand, our crisis prevention and management instruments, which have proved to be largely inappropriate or insufficient. Therefore, in order to prevent a similar crisis from occurring in the future, these instruments must be strengthened. This entails a reform of the international financial architecture. The mechanisms and content of international cooperation must be reviewed with the aim of devising crisis prevention and management tools that better take account of the greater interdependencies between the economic and financial systems of advanced and emerging countries.
I am rather doubtful myself, for several reasons. First, in the absence of single accounting standards, a comparison between banks belonging to different accounting universes will mean absolutely nothing. Second, that sort of ratio did exist in the United States and proved of no help, precisely in the country where the crisis emerged. Finally, in the present circumstances, it could add to the reluctance of banks to be active lenders in the interbank money market, therefore reducing market liquidity and still increasing the over-reliance of the banking sector on the central bank counterparty. That said, it is essential to enhance the counter-cyclical nature of capital requirements. For instance, implementing a forward-looking provisioning system and an additional capital requirement at the cycle peak would be effective measures to make capital requirements more contra-cyclical. In this regard and especially in the light of the profits announced by the major banking groups and the large payouts to traders, CEOs or shareholders in the form of dividends, I would like to stress that these profits should primarily be used to bolster capital ratios and allow banks to focus on their core task of financing the economy. All in all, I praise international standards in the field of prudential rules.