Joint Letter from G20 leaders

March 29, 2010

Dear G20 Colleagues,

In Pittsburgh we committed to make the G20 the premier forum for international economic co-operation. As the past, current, and future chairs of the G20 Leaders’ Summits, we are writing to you today to
emphasise the need to implement our commitments to ensure strong
macroeconomic policy cooperation and to continue our regulatory reform
to strengthen the international financial system.

Last week, our Sherpas met in Ottawa to review key elements of the G20 agenda in 2010 and to map out the main tasks ahead for us. Good progress was made in that meeting in setting the stage for the Toronto
summit and in looking ahead to Seoul. The meeting also highlighted the
important impact of the decisive and collective actions we have taken
during our last three summits. Together, our efforts have succeeded in
stimulating a recovery of the global economy and avoiding a total
breakdown of the financial system.

But our task is not yet complete. The nascent recovery in the world economy remains fragile. Current strains illustrate the continuing risks to global economic and financial stability. It is vital that we,
in a spirit of enlightened self-interest, continue to work together to
achieve our mutual objectives in addressing new and emerging risks,
safeguarding stability, and supporting a robust return to growth and
job creation in all our economies. Our goal must be to strengthen the
global financial system and build a stronger global economy rooted in
sustainable growth and prosperity for all.

Our first objective is the return to sustained growth and job creation. To fulfil this objective, we need to design cooperative strategies and work together to ensure that our fiscal, monetary,
foreign exchange, trade and structural policies are collectively
consistent with strong, sustainable and balanced growth. It is in the
interests of each country and each region to contribute to these
objectives through better cooperation with the global community. We all
understand that ongoing trade, fiscal and structural imbalances cannot
lead to strong and sustainable growth. Without cooperative action to
make the necessary adjustments to achieve that outcome, the risk of
future crises and low growth will remain. All G20 countries must move
quickly to implement the first steps of the new Framework agreed to in
Pittsburgh - to report robustly on what each of us can do to contribute
to strong, sustainable and balanced global growth.

Following the completion of the IMF’s report on the collective consistency of our national policies, we will need to agree in Toronto on the major risks to global economic stability and sustained growth,
and policy options on which we will base the actions we must take
together to minimize these risks. We will also need to develop more
specific policy recommendations for our Seoul Summit in November.

We must ensure that our international financial institutions are strengthened to meet the needs of today’s global economy. Reforms are needed to enhance their credibility, legitimacy and effectiveness, to
reflect the strong growth in dynamic emerging and developing countries,
and to equip them to foster sustainable growth, promote financial
stability and lift the lives of the poorest. We must follow through and
complete the governance reforms we agreed to in Pittsburgh by the
deadlines we set.

The G20 must go beyond merely advocating for trade and against protectionism. With regard to Doha, we need to determine whether we can achieve the greater level of ambition necessary to make an agreement
feasible. Since last summer, a number of countries have engaged
directly with each other to advance this goal. To reach a successful
outcome we must give political impetus to our negotiators, which should
also be reflected in national actions. We must continue to resist
protectionist pressures, and to promote liberalization of trade and
investment through the national reduction of barriers, as well as
through bilateral and regional negotiations.

Action is also needed to improve access to diverse, reliable, affordable and clean sources of energy which are critical for sustainable growth. We must therefore reinvigorate our work to improve
the functioning of energy markets and to phase out inefficient fossil
fuel subsidies that distort markets and impede investment in clean
energy sources for the future.

Collectively we have been making steady progress toward stabilizing and strengthening the global financial system by fortifying prudential oversight, improving risk management, promoting transparency, and
reinforcing international cooperation. While confidence in the
financial system has improved, more work is required to restore the
soundness of some global banks’ balance sheets, to avoid leaving the
global financial system vulnerable and restricting its ability to
provide the credit needed to fuel sustainable economic growth.

We all have a mutual responsibility to deliver on all our commitments to address the weaknesses that led to the financial crisis. This will require that we maintain our vigilance to address the
required reforms and guard against complacency as our economies recover.

There can be no let up in our commitment to:

• develop, by the end of this year, strong international rules on capital and liquidity so that banks have the level and quality of resources they need to cover the risks they take, supplemented by a
  fully harmonized leverage ratio as an element of the Basel framework.
  These new rules must be implemented as soon as financial conditions
  improve and the economic recovery is assured, with the aim of national
  implementation by end-2012. All major financial centres must also have
  adopted the Basel II framework by 2011;
• strengthen the infrastructure of key financial markets to enhance their resilience and reduce the risks of contagion. Standardised over-the-counter derivatives contracts should be traded on exchanges or
  electronic platforms, where appropriate, cleared through central
  clearing counterparties by 2012 at the latest, and reported to trade
  repositories;
• address together the remuneration practices that encourage short-term and excessive risk taking by fully implementing the internationally-agreed compensation standards as set out by the
  Financial Stability Board;
• move forward to create a framework to address cross-border resolutions of systemically important financial institutions. This should include establishing crisis management groups for major
  cross-border firms and resolution tools and frameworks that will reduce
  moral hazard. Prudential standards for systemically important
  institutions should be proportional with the costs of their failure; and
• honouring our commitments to lead by example by implementing international standards and agreeing to undergo periodic peer reviews to evaluate our adherence to these standards. Achieving the ambitious
  peer review agenda that has been set for 2010 will be an important
  milestone.

We look forward to reviewing in Toronto the report we commissioned from the IMF on the range of options countries have adopted or are considering as to how the financial sector could make a fair and
substantial contribution toward paying for any burdens associated with
government interventions to repair the banking system.

Our finance ministers and central bank governors will review progress and report to Leaders in Toronto and in Seoul on the priority actions needed to meet our commitments, and whether further impetus may
be required to ensure that established timelines are met.

Now is the time for the Leaders of the G20 both to recommit themselves and deliver on the ambitious reform objectives and agenda we have already agreed to and to explore cooperative approaches to meeting
our common goals. We all know that an agreement to act is just a start.
It is acting on the agreement that matters. We are all accountable. The
challenges we face are great, but the rewards of success are greater
still. We are confident that, by acting together, with common purpose
and shared resolve, we can deliver the sustainable growth and
prosperity our citizens deserve.

STEPHEN HARPER
Prime Minister
Canada

LEE MYUNG-BAK
President
Republic of Korea

GORDON BROWN
Prime Minister
United Kingdom

BARACK OBAMA
President
United States of America

NICOLAS SARKOZY
President of the French Republic.