Brazil will push for tighter financial regulation at the G20 summit this week, proposing annual "stress tests" for banks and the extension of Basel rules to derivative markets, Finance Minister Guido Mantega said on Wednesday.
Lack of regulation in financial markets were at the root of the global economic crisis, Mantega told reporters in New York, and there is broad consensus among Group of 20 members about the need to tighten the grip on the banking industry.
"We have to consolidate financial regulation to bring more confidence to markets and stop future crisis," the minister said after a presentation to investors organized by the Brazilian American Chamber of Commerce.
Brazil supports current proposals among G20 members for new rules on bankers' bonuses and more transparency in the banking industry, Mantega said, speaking the day before the two-day G20 summit in Pittsburgh.
"But I believe we can go beyond what has been proposed," he added, mentioning a plan that would require banks to undergo annual stress tests — such as those carried out in some countries this year — to determine whether they need additional capital injections.
Brazil will also propose the Basel II rules on minimum capital requirements be extended to derivative markets, as well as the creation of clearing houses to increase the security of those markets, Mantega said.
But Brazil is against any impositions on countries that might potentially arise from a U.S. proposal to rebalance the global economy.
The plan seeks to shrink trade surpluses in export-rich countries such as China and boost savings in debt-laden nations like the United States.
That rebalancing should occur naturally, without impositions or trade restrictions of any sort, Mantega said. On Tuesday, the minister said Brazil disagreed with the rebalancing plan because the U.S. proposal was "obscure."
G20, THE NEW WORLD FORUM
Brazil will also suggest that leaders of the G20 — which groups the world's major rich and developing countries — meet every year to consolidate the group as the main world forum for economic issues.
"This is the first step — to consecrate the G20 as the most important global forum, responsible not only for (dealing with) this crisis but for all economic issues."
That would not mean the end of the Group of Seven industrialized nations, Mantega said.
"There is nothing stopping the G7 to keep their meetings just like the BRIC countries will keep meeting on their own," he said, referring to the group of emerging countries formed by Brazil, Russia, India and China.
The G20 was formed after the Asian financial crisis in the 1990s to give major industrialized powers such as the United States and Germany a forum to talk to the wider world. The first G20 summit took place last November, soon after the collapse of Lehmann Brothers triggered a global financial crisis.
