A New International Financial Architecture?

". . . the current international financial system is unable to safeguard the world economy from financial crises of high intensity and frequency and devastating real effects", reported the Task Force of the Executive Committee on Economic and Social Affairs of the United Nations on 21 January. Reforms relating to international monetary and financial issues, which is the main focus of the report, should be addressed with a sense of urgency, based on a broad discussion involving all countries, and a clear agenda, including all key issues. The United Nations, as a universal and the most democratic international forum, should play an important role in those discussions and in the design of the new system, it stated. The six priorities:

* Improved consistency of macroeconomic policies

The most appropriate institution or set of institutions to ensure such consistency should be subject to debate, but proposals include granting greater policy powers to the International Monetary Fund (IMF) Interim Committee and broadening the Group of Seven to include representatives of developing and transitional economies, as well as strengthening the United Nations Economic and Social Council, to provide political leadership and promote broad consensus on international economic issues.

* Ensuring adequate international liquidity in crisis

IMF resources should be enlarged in order to enable it to enhance the stability of the international financial system. Recent contingency financing mechanisms should become the basis for a stable, low-conditionality facility for countries experiencing financial contagion. Today, IMF operates more as an organizer of rescue than as a provider of funds. The conditions attached to the use of its funds are not always appropriate to the problems faced by countries in distress, and it has very limited capacity to stop contagion.

* Codes of conduct, governance, transparency, supervision

These should include international standards to combat money and asset laundering, as well as corruption and tax evasion, and be consistent with the main international human rights instruments. A central element of a new international financial architecture is the development of regulatory and supervisory mechanisms that will better correspond to today's globalized private capital and credit markets. An important proposal in this area is the recommendation to create a world financial authority - or a standing committee for global financial regulation -...