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Commentary

Can the T20 Help the G20 Meet the Challenges of Financial Regulation?

Meredith Williams, G20 Research Group
December 2, 2016

Financial regulation and supervision have not disappeared from Germany's G20 agenda for its Hamburg Summit on July 7-8, 2017, but it has not yet appeared in a robust or even recognizable way on the agenda of the Think20, whose mission is to provide the G20 with concrete actionable recommendations that G20 governors could use. At the T20 kickoff conference in Berlin on December 1, 2016, German sherpa Professor Lars-Hendrik Röller identified financial regulation as one of the core continuing items that Germany's G20 would also address.

The first of four policy areas of focus mentioned by Röller was financial regulation and economic resilience. He spoke specifically on the idea of harmonizing the internal banking models of G20 members, and how this would affect each domestic bank differently. Further to this point, he touched on the observation made by Chancellor Merkel that the G20 agenda has evolved over time since 2008, when the focus was finance, world economy and tax issues, toward a focus on terrorism, migration, climate change, and sustainable and inclusive growth. This shift has been evident at the T20 conference in Berlin, where the focus has remained on creating sustainable economic growth and overcoming uncertainty in the G20 members.

Germany's T20 has organized nine task forces, including one on financial resilience. This task force seems closest to the key issues of financial regulation and supervision, which will remain challenging over the coming year. However, in a breakout session devoted to financial regulation on the afternoon of the kickoff conference, only the development aspects and agenda were taken up. The panel on the 2030 Agenda made a key point that innovation can reduce conflicts among different aspects of sustainability, and there are many new aspects that suggest the focus should extend beyond the 2017 Hamburg Summit to Argentina's summit in 2018. Much of the discussion remained very broad and touched on financial regulation, financial resilience, taxation and macroeconomics — topics that Röller had highlighted in his keynote address that morning as the core elements of Hamburg agenda. Broad statements and a lack of robust discussion about these topics produced discussions on the possible role that the G20 could play in economic development, how to achieve leadership buy-in of the G20 members, and the promotion of a universal agenda that is first endorsed at home in their own countries. This was an unexpected point of focus, which disappointingly drew the discussion away from the core issues of financial regulation and resilience supporting the 2030 Agenda.

At the end of the first day at the T20 kickoff conference, a big question stood out: does the T20 have the responsibility and capacity to contribute to meeting the key challenges on financial regulation and supervision that the G20 will face in 2017. Italian banks are on the verge of needing a bailout as they struggle to secure other acquired capital, especially should Prime Minister Matteo Renzi lose the referendum that he has called on December 4, 2016, and thus be politically forced to fulfill his pledge to resign. U.S. president-elect Donald Trump has promised to replace the Dodd-Frank Act with a more business-friendly alternative whose key elements, while not yet spelled out, will likely be less strong and more harmonized than the ones prevailing in the United States at present. China and other emerging countries including Argentina, the host of the 2018 G20 summit, remain in the process of meeting the financial regulatory standards for banking and financial industry that G20 leaders agreed to as a key achievement at the Seoul Summit in 2010. So, even as the G20 and the T20 appropriately move toward a broader agenda, there is still much work to be done on the central issue of financial regulation and supervision that catalyzed the creation of the G20 as a summit-level institution in response to the financial crisis in the autumn of 2008.

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Meredith Williams, BAH, is a research associate and social media strategist with the G20 Research Group and the G7 and G8 Research Group based at the Munk School of Global Affairs in Trinity College at the University of Toronto. She completed an honours bachelor of arts in political science from Queen's University, with a focus on international political economy and international relations. She is the lead researcher on financial resilience and economic regulation. She has worked on compliance reports on financial regulation in response to the 2008 global financial crisis and other research projects, was a member of the home team during the 2016 G20 Hangzhou Summit and attended the T20 think tank conference that kicked of Germany's 2017 G20 presidency. She is currently employed full time at one of Canada's largest banks.

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