By Vestnik Kavkaza
Russia became the chairman of the G20 on December 1, 2012. The G20 is an informal union of the major economic of the world. According to President Vladimir Putin, for Russia “it is first of all an opportunity to offer its partners a positive, thoughtful agenda which is aimed at solving common problems which concern all countries of the world. We intend to use our chairmanship effectively for the fulfillment of long-term national tasks and the improvement of Russia’s positions in the sphere of global economy management.”
The G20 was established in 2008 and became an important instrument of anti-crisis reacting. Due to consolidated activities of the countries-members, the economic decline was prevented in a short term and the control over national financial systems was improved. Later, the systemic reorganization of the international economic architecture was undertaken, considering requirements of the 21st century – establishing mechanisms which secure economies from risks, improvement of mutual trust and encouragement of stable and balanced development of the global economy. According to Moscow, its main goal as the chair of the G20 is to consolidate efforts for development of measures on encouraging the economic growth and creating jobs – investments, mutual trust, effective management and transparency at the markets.
According to Sergei Shvetsov, Deputy Chairman of the Bank of Russia, first of all, for Moscow the G20 is an idea bank: “We can invent anything you want, and there will always be a lack of confidence to this. But if foreigners will say something - it will be just OK, and if we make our own decision on it, and if not just any two or three foreign financial centers but all the financial centers agree with this - it will be great. That is, it is a certain acceleration of the process of making and implementing decisions.
Fools learn from their own mistakes, but smart people learn from others' mistakes, some do not learn at all, even from their own mistakes. The G20 process revealed both bad and good experience. The errors emerged, got out on a global scale, and we encountered them.
The first thing the Central Bank did in 2008 when crisis events began was to create a group of economists who began to spread to people within the Central Bank information on the situation abroad, measures for getting out of the problem, and so on. We created some access to information under the G20, because the process was public. No country hid its problems, because they leaked out. And because of that we were able to save a lot of time to get around those errors that our colleagues had faced,” Svetsov thinks.
“The fact is that several control measures cannot be implemented in some jurisdictions, because the absence of these measures in other jurisdictions will make the market flow over there. If I really want to have some global stability, we have to actually implement these synchronous regulatory measures, otherwise we just lose our national market, deliberately put ourselves in a worse condition, and those who do not observe discipline or refuse to participate in the process gain temporary advantages - maybe for three months, maybe for a hundred years. It's like fighting against offshore companies: we can fight against them only by being together. Only half of the countries cannot give up their offshore companies, because this will not make sense. Unfortunately, these are things which need to be accepted by everyone.
The process of creating the "Basel 3" is a process that, in general, does not please any of the banking system, because the return on capital is reduced, which means that this capital is harder to be found, it becomes more expensive. But it raises some financial stability. Nobody is going to fight for something to be spread in at least half of the jurisdictions. It is important that any decision should apply universally to all stakeholders.
Secondly, we define systemically important institutions. It is important to understand that the financial system is not only a risk for shareholders and financial institutions. In the ordinary sphere the bankruptcy of an organization is bad for jobs and bad for shareholders, because they lose their capital. The bankruptcy of the financial system means that there is a "domino effect" and loss of confidence. It's like a bicycle: when it is going very slowly, it is very unstable. The goal of regulators is the speed for two-wheeled bicycle with which it will neither crash nor fall on its side through going too slowly. Accordingly, the financial institutions, which play a systemically important role, are not enough to make shareholders suffer and sufficient so that systemically important functions continue to run. So we distinguish institutions, including regional institutions in Russia, followed by a completely different supervision, other investments in surveillance, and with added certain regulatory requirements, somewhere relieving conflict of interest related to the achievement of short-term goals for motivation, somewhere requiring different capital or reform plans in the event of difficulties, which are written in advance, and so on. Being a systemically-important institution is generally more difficult than being a n ordinary financial institution because there are additional responsibilities, it is not a privilege. When the G20 voiced the theme of systemically important banks for the first time, we began to get letters: "Please include us in the list of systemically important banks and give us unsecured loans at a discounted rate because we are systemically important". No, this is just the opposite. "Systemically important" means more responsibility and more restrictions.”
