Lax financial regulatory regimes must be tightened or
sanctions could be imposed under a tough new framework overseen
by the G20, UK Chancellor Alistair Darling has warned in an
Leaders of the worlds richest nations will use the IMF
meetings to tell countries that fail to strengthen financial
regulation that they could be blacklisted, Darling
said. The initiative aims to mirror the success of the
G20s moves to crack down on tax havens.
Darling, this years chair of the G20 finance
ministers, told Emerging Markets that there was no space for
regulatory havens in proposed new rules for
He also called on regulators in all countries with exposure
to the global banking system to put in place systems to cope
with the collapse of a cross-border financial institution.
Just as we want to go after tax havens, we want to go
after regulatory havens as well, he told Emerging
Markets. It is not good for financial stability that some
companies can operate out of a Caribbean island, and shelter
behind a veil of secrecy, and we dont know what they are
The Financial Stability Board, the group of financial
regulators and central banks that is drawing up the details of
the plan, will include a provisional blacklist of regulatory
havens ahead of the G20 finance ministers meeting in St
Andrews, Scotland, in November, as well as a grey list of
regimes that need to make improvements.
The FSB will also lay out its criteria. It will suggest
positive sanctions such as help with improving a countrys
regulatory capacity, as well as negative sanctions such as
raising the cost of dealing with banks in a blacklisted
It would mimic the April initiative against tax havens,
under which G20 leaders agreed that the OECD would publish a
list of all tax havens split into three categories that became
known as the black, grey and white lists.
Darling and other G20 finance ministers are keen to use the
IMF meetings as an opportunity to send a warning signal to
countries that may be on the provisional blacklist.
The move is part of a wider effort to ensure that all major
countries follow the proposals for financial reform announced
by the G20 leaders at their Summit in Pittsburgh last week.
Darling said that the series of financial failures showed
that the major institutions that had been the cause of the
current difficulties had traded in every single corner of the
We have an interest in making sure that the regulatory
regime is robust, so that you dont end up with banks
falling between stools, he said. I am concerned
about countries that dont have such robust regimes. As it
becomes less and less clear what exactly their arrangements
are, that could have quite a destabilising effect on other
It does worry me that if you have a problem in one
particular country, and other countries dont see it as
their problem until too late, you have to get an international
resolution regime in place.
The issue was under discussion at both the IMF and G20, but
the problem is just that: it is being discussed, and it
needs to be acted on.