BRUSSELS, Belgium – The world's top economies should hold a global summit this year on reforming the world's financial system, British and French leaders declared Wednesday.
British Prime Minister Gordon Brown said the international summit could be held as soon as November and should involve the United States, European nations and emerging economies such as China and India. It would also aim to relaunch stalled global trade talks.
“I believe there is scope for agreement in the next few days that we will have an international meeting to take common action ... for very large and very radical changes,” he told reporters before meeting with other EU leaders for talks on the financial crisis.
French President Nicolas Sarkozy also demanded fundamental reform of the world financial system, and a summit “preferably in New York, where everything started.”
“We have treated the immediate symptoms of the crisis without attacking the roots of the disease,” he said. “We need to found a new capitalism based on values that put finance at the service of companies and citizens and not the reverse,” he told the EU summit.
“This fundamental reform can't stop at Europe. The economy is global; no country can protect itself alone,” he said. He demanded that new global rules cover all financial institutions – including hedge funds.
Brown said an overhaul of global financial bodies like the Washington-based International Monetary Fund, and the creation of better rules governing financial markets, were “urgently needed so that we can restore confidence” in the global financial system.
“The IMF has got to be rebuilt as fit for purpose for the modern world. We need an early warning system for the world economy,” he told reporters, saying this needed the same vision that founded the United Nations, the World Bank and the IMF in the 1940s.
In a document obtained by the AP, Brown said he wants banks to rethink how they deal with risk, and calls for rules that make banks hold enough funds to cover potential losses, improve transparency in the system and eliminate conflicts of interest.
He also wants executives to take more responsibility and end a system that encouraged reckless risk-taking.
“Urgent work is needed to prepare proposals that address executive compensation structures that encourage excessive and irresponsible risk-taking by financial institutions,” the paper says.
He also said governments need to try to close gaps in the “emerging shadow banking system.”
The financial boom saw many banks jump into largely unregulated areas – such as complex securitized investments – while high-risk investors like hedge funds operated in near-secrecy.
His paper urges “globally accepted standards of supervision and regulation applied equally and consistently in all countries.”
German Chancellor Angela Merkel also called for a meeting between the G-8 group of the world's leading industrialized nations and emerging economies, saying they had to make decisions “so that something like this can never happen again.”
Brown said creating a new international financial architecture should be “an immediate task” to restore confidence in markets. He said he wants a group of supervisors from major nations to monitor the world's 30 largest financial institutions.
“We now have global financial markets but what we do not have is anything other than national and regional regulation and supervision,” Brown said. “If we are going to sort out global financial problems ... we need better ways of doing this.”
Founded in the aftermath of World War II, the 185-nation International Monetary Fund became the international economy's fire brigade in the 1990s, providing loans to countries in financial trouble from Thailand to Turkey, while requiring dire belt-tightening measures in return.
It has faced an identity crisis in recent years because it has lent less to developing nations. The past week has changed that, with Iceland, Hungary and Ukraine now considering IMF bailouts.
Associated Press writers Constant Brand, Robert Wielaard and Laurent Pirot contributed to this story.
