Denver Summit of the Eight
Promoting Financial Stability:
Executive Summary

Denver, June 21, 1997
[Final Report to the Heads of State and Government on Promoting Financial Stability]

At the request of the Heads of State and Government in Lyon, the G7 Ministers of Finance are pleased to report on the extensive progress that has been achieved in promoting the stability of the global financial markets in the four areas delineated in the Lyon Summit Communique:

International Regulatory Cooperation

Supervisors[*] have developed a set of proposals for enhancing cooperation in the supervision of globally-active financial institutions on an on-going basis and in emergency situations.
Supervisors have made, substantial progress toward agreement on a framework of supervisory principles for globally-active financial institutions, including techniques to assess capital adequacy.

Risk Management and Market Transparency

Supervisors have studied the organizational and management structures of selected globally active financial conglomerates, developed supervisory tools to better understand their risk management processes, and are expanding guidance on sound risk management systems.
Supervisors have taken steps to enhance disclosure practices by financial firms and to improve the information firms provide to supervisors and regulators.
G10 Central Banks have taken steps to reduce settlement risk in foreign exchange transactions and, together with IOSCO, in securities settlement systems.

Prudential Standards in Emerging Economies

The Working Party on Financial Stability in Emerging Market Economies, comprised of representatives from the G10 countries and emerging market economies, issued a report recommending a concerted international strategy to assist emerging economies in strengthening their financial systems based on a set of broad principles and practices. The working party proposes roles for international regulatory bodies, international financial institution and for providers of technical assistance, while emphasizing the ultimate responsibility of national authorities in emerging market economies, the need for sound macroeconomic policies, and the importance of open, competitive, and transparent markets.
The Basle Committee, in cooperation with 15 key emerging economies, developed a set of "Core Principles for Effective Banking Supervision," which will contribute significantly to the adoption of improved prudential standards worldwide, particularly in emerging markets.

Electronic Money

The G10 Working Party on Electronic Money reached agreement on a set of broad objectives and key considerations to help guide national approaches to emerging electronic payment technologies, including the need for transparency, financial integrity, technical security, and evaluations of vulnerabilities to criminal activity.

Looking Forward

Looking beyond the Denver Summit, G7 Finance Ministers urge that efforts to strengthen the international financial system continue. We have identified two areas warranting particular effort. In the area of enhancing cooperation among supervisors of globally- active financial institutions, we have encouraged international regulatory bodies and national supervisors to reach agreement and implement their proposals for enhanced cooperation. We are also undertaking an assessment of the impediments to information sharing that have been identified. With respect to strengthening financial systems and prudential supervision in emerging economies, we have asked the G10 Deputies, in collaboration with emerging market representatives, to review implementation of the strategy proposed by the working party. We have also called on the international regulatory bodies, the IMF and the World Bank to report to Finance Ministers next April on their contributions to this process.

[*] The term "Supervisors" is meant to refer broadly to national supervisory and regulatory authorities, and, where applicable, to organizations of supervisors, including the Joint Form on Financial Conglomerates, or its sponsoring bodies, the Basic Committee on Banking Supervision, the International Organization of Securities Commissions ("IOSCO") and the International Association of Insurance Supervisors ("IAIS").

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Source: Released at the Denver Summit of the Eight

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