If a spoonful of sugar helps the medicine go down in a most delightful way, what could possibly be the sugar for suffering global economy Finance Ministers and Central Bank Governors are once again preparing to bring the "sugar" to the table of G20 meeting in Seoul in November, this time with additional non-member countries and international organizations.

History

The G20 was established in 1999, in the wake of the 1997 Asian Financial Crisis, to bring together major advanced and emerging economies to stabilize the global financial market. Here, the heavy discussions measure to promote the financial stability of the world and to achieve a sustainable economic growth and development.

The concerted and decisive actions of the G20 -- with its balanced membership of developed and developing countries -- helped the world deal effectively with the current financial and economic crisis. The G20 has already delivered a number of significant and concrete outcomes. It committed to implement the unprecedented and most coordinated expansionary macroeconomic policies, including the fiscal expansion of US$5 trillion and the unconventional monetary policy instruments; significantly enhance the financial regulations, notably by the establishment of the Financial Stability Board (FSB); and substantially strengthen the International Financial Institutions (IFIs), including the expansion of resources and the improvement of precautionary lending facilities of the IFIs.

Reflecting on these achievements and recognizing that more needs to be done to ensure a strong, sustained and balanced global recovery, the G20 Leaders at the Pittsburgh Summit designated the G20 as the premier forum for international economic cooperation. After the July meeting in Canada, the November Summit will be held in the Republic of Korea.

What's new in November summit

The G20 has invited non-G20 member countries to previous Summits, in the interest of enhancing its effectiveness and representativeness. In keeping with the principles agreed upon by the G20 member countries, the Korean Government issued the invitations to five additional countries for November meeting:

Malawi, the Chair of the African Union, and Ethiopia, the Chair of the New Partnership for Africa's Development (NEPAD) were chosen in order to strengthen the representation of the African region at the Seoul Summit.

Vietnam, the Chair of ASEAN, and Singapore, Chair of the Global Governance Group (3G) were also chosen to reflect the opinions of non-member countries, in light of the fact that the Seoul Summit will be the first G20 Summit to be held in Asia. Lastly Spain -- as one of the ten largest economies in the world and a participant in the past four G20 Summits - was invited as well.

Seven international organizations that are invited for the G20 Seoul Summit are: United Nations (UN), International Labour Organization (ILO), World Bank (WB), International Monetary Fund (IMF), Organization for Economic Cooperation and Development (OECD), World Trade Organization(WTO), Financial Stability Board (FSB)

 

Bank stability is financial stability

According to Bloomberg, the latest statement of the Financial Stability Board has warned that the big banks, with the new rules, will be required to meet higher capital standards. That has turned the spotlight to the G20 Seoul Summit to further addresses to the big banks. Financial Stability Board Chairman Mario Draghi stressed the importance of a strong financial system with higher capital standards, "We have a proper transition period so that we don't risk hampering the economy." G20 leaders established FSB in 2009 to coordinate the work of national regulators and international standard setting agencies. This year in the capital city of South Korea, FSB is expected to make proposals based on their study on capital surcharges, contingent capital, and bailed-in assets, to suggest a possible solution for the largest lenders.

Basel Committee on Banking Supervision, or regulators of the 25 nations, has already reached an agreement on new rules (more than double capital requirements for banks, while giving them maximum of eight years to comply in full). These proposals will force lenders to have common equity equal to at least 7 percent of assets, weighted according to their risk, including a 2.5 percent buffer to withstand future stress. Banks that fail to meet the buffer would be unable to pay dividends, though they wouldn't be forced to raise cash. Lenders will have less than five years to comply with the minimum ratios and until Jan. 1, 2019, to meet the buffer requirements.

 

G20, Can you handle collapsing banks

The Lehman Brothers' nightmare should never return in any country. Global policymakers in November are expected to suggest ways to ensure the stability of the big banks. Before the summit, the Group of 20 members will endorse a range of options such as the use of capital surcharges on big banks, and the need for each country to set up effective resolution authorities.

 

G20 set to grow economy

President Lee Myung-bak stated, "During the Toronto G20 Summit last June, the leaders agreed to reach an agreement on many of the important topics during the G20 Seoul Summit in November. We promised to do all that we can to bring about workable and substantive agreements on issues such as reform of international financial institutions, financial regulatory reform and balanced and sustainable growth, among others. Furthermore, we seek to achieve progress in topics of global interest, including the global Financial Safety Net and the issue of development."

Sa Kong Il, Chairman of the Presidential Committee for the G20 Seoul Summit, added "Asia's enhanced economic status provides us with an opportunity to rebuild and reconsider Asia's role and position in the context of global governance."