Promoting Financial Stability:
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.
- 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
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