2008 - 2009

Responses by the G20 countries to the subprime crisis

The G20 emerged as the principal forum for coordinating an international response to the global financial and economic crisis of 2007-2008. This inter-governmental body, formed in 1999, comprises the world’s twenty largest economies, representing around 90% of global GDP. This gives it greater legitimacy than other bodies such as the G8, which does not include several of the major emerging nations.

In late 2008, the G20 met in Washington for the first time at head of state or head of government level. This meeting called for prudential and financial supervision rules to be strengthened. In 2009, the G20 summits in London and then in Pittsburgh formulated the outline of new international financial regulations, proposing a series of measures to regulate economic and financial players’ behaviour. These included:

stronger capital requirements for banks (the Basel III prudential regulations, adopted in 2010);

controls on market operators’ remuneration, to avoid them taking excessive risk. In Europe, these were complemented in 2013 by a ceiling on traders’ bonuses;

changes to international accounting standards, to attenuate their pro-cyclical nature. These changes targeted, in particular, the valuation of portfolios at market prices when considered to be non-representative;

strengthening supervision of the financial sector and the monitoring of systemic risk, with the formation of the Financial Stability Board (succeeding the Financial Stability Forum set up in 1999) and colleges of supervisors for cross-border financial institutions. In Europe, this led to the formation of the European Systemic Risk Board, attached to the ECB, and of three pan-European authorities to regulate banks, insurance companies and the financial markets;

stronger efforts to combat tax havens, with the OECD given, in particular, the role of publishing a list of non-cooperative countries;

implementing and/or strengthening the regulation of rating agencies, speculative funds and markets for derivative over-the-counter products.

Faced with the financial crisis, the major central banks adopted, for their part, unprecedented measures. In particular, following Lehman Brothers’ bankruptcy in 2008, they simultaneously announced a 50-basis point cut in their key intervention rates. Moreover, as early as 2007, swap agreements have been put in place between central banks to enable banks from different countries to access the currencies they needed. The central banks then relaxed their monetary policies at their own pace and implemented non-conventional monetary policies to the extent they felt appropriate.