Who's in Charge of Fixing the World's Financial System? The Un[?]der-Appreciated Lead Role of the G20 and the FSB

Abstract

Many financial and economic professionals are under-appreciative (and some, possibly, unaware) of what is stated in second part of this paper's title: biggest players in fixing global financial system are Group of Twenty (G20) largest and most powerful economic and financial nations, and Financial Stability Board (FSB), G20's main financial system reform policy-making agent. This paper explains nature of G20's leadership role by presenting a stylized history of that group's emergence, assisted by FSB, as premier forum in reform of global financial system. The paper begins with a brief explanation of what G20 and FSB are, highlighting basic information on their membership composition and missions, and their relative financial heft in global economy. Focusing on major statements, declarations, and communiques from G20 Leaders' Summits beginning in late-2008 at depth of global financial crisis, paper describes rapid emergence of G20 as pre-eminent global financial system policy-making entity. That description shows how, over turbulent 2008-2009 period, G20, with aid of newly-created FSB, established core elements of what remains the global financial system reform agenda. The study then turns to subsequent evolution of that agenda over 2010-2012, when substantial, but uneven, progress was made in achieving major objectives. The paper concludes with a summary of status of G20/FSB financial system reform agenda in aftermath of September 2013 Leaders' Summit in St. Petersburg, Russia, an event that in a sense marked 5-year anniversary of Lehman Brothers moment and full eruption of global financial crisis in September 2008.