IIF also highlighted three areas where it encouraged the G20 to take action.
Complete the G20 Regulatory Reform Agenda
IIF reiterated the financial industry's continued support of the G20's financial regulatory reform agenda. It noted that the system is now much safer than it was before the crisis, thanks to the industry's own actions and regulatory reforms undertaken. It urged the G20 to maintain a risk-based capital system, warning that switching to "simple" alternatives would be a wrong turn at a time when planned reforms are just becoming effective. IIF also noted its strong support of a refined capital framework that better balances risk sensitivity, simplicity and comparability.
IIF called for the G20 to remain committed to its original goal of a globally consistent regulatory framework. It warned that global approaches may be undermined by unilateral, uncoordinated, or extraterritorial actions by individual countries, to the detriment of a global level playing field and, more importantly, the effectiveness and resilience of the global financial system.
IIF supported the G20's push to enhance the role of the private sector in financing investment in infrastructure. IIF noted that investment needs are projected to increase from
IIF identified a number of key impediments to private sector financing of infrastructure that need to be addressed. These include the ongoing deleveraging of the banking sector; uncertainty about the potential impact of proposed regulatory changes that include higher capital charges for long-term investments in the insurance and pension sectors; uncertainty about the macroeconomic outlook; and, in many emerging markets, policy and political uncertainties, governance concerns, and capacity constraints.
IIF said it strongly supported efforts by both the public and private sectors to develop capital market instruments for infrastructure projects to help facilitate deeper private sector involvement. IIF also noted that fostering the emergence of infrastructure financing marketable instruments as a new asset class would increase both the pool of investable and attractive long-term assets and the supply of private financing.
Encourage Policies that Strengthen Capital Flows to Emerging Markets
IIF noted that emerging market conditions have continued to be quite choppy, including a significant market correction in early 2014. IIF also noted that market stresses seemed to reflect increased investor concerns about macro-economic imbalances, dependence on external financing, and other political and policy uncertainties in several vulnerable emerging market countries. IIF encouraged the U.S. Federal Reserve to continue prudent management and effective communication with regard to its exit from quantitative easing. It also urged vulnerable emerging market economies to advance solid and convincing macroeconomic frameworks. It stated that emerging market economies need to step up implementation of the broad range of structural reforms to overcome infrastructure bottlenecks and promote faster expansion of their productive capacity.
IIF also welcomed the emphasis by the G20 on promoting global financial integration and enhanced financial inclusion in developing countries.
The full text of the letter can be found here: www.iif.com/emp/article+1375.php
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