G7 pledges to safeguard financial system

Washington: The Group of Seven finance ministers and central bank governors are maintaining "heightened close cooperation" and pledged yesterday to take necessary actions to safeguard the international financial system.

In a statement released by the US Treasury, the G7 finance ministers and central bank governors said they held a conference call to discuss global financial markets and welcomed "extraordinary" US actions to take ill-liquid assets off of bank balance sheets.

"We pledge to enhance international cooperation and to address the ongoing challenges in the global economy and world markets and maintain heightened close cooperation between finance ministries, central banks and regulators," the G7 said in its statement. "We are ready to take whatever actions may be necessary, individually and collectively, to ensure the stability of the international financial system."

The statement comes a few weeks in advance of the next scheduled G7 central bank governors and finance ministers meeting in Washington on October 10.

While the G7 welcomed the $700 billion US asset purchase plan, it stopped short of saying that other countries would implement similar actions to mop up bad loans and securities choking the financial system. Instead, it focused on central bank liquidity actions and regulatory moves to combat market manipulations.

"Major central banks have been coordinating to address liquidity pressures in funding markets, which has been critical in addressing disruptions in global financial markets," the G7 said in the statement. "Several regulators have taken decisive actions to combat market manipulation and stabilise financial markets, including a temporary ban on short selling of financial stocks."

Separately, German Fin-ance Minister Peer Steinbrueck told reporters in Berlin yesterday that the G7 countries apart from the United States - Canada, Britain, France, Germany, Italy and Japan - do not plan any measures comparable to the US package to support the banking sector.

The G7, said it recognised the importance of making regulation more effective and bringing investors back into a "liquid and stable marketplace" and affirmed their commitment to protect financial system integrity, which it called "essential for supporting the health of the world economy".

The G7 said it remains committed to full and rapid implementation of the Financial Stability Forum's recommendations to enhance financial system resilience.

"We look forward to the FSF report this fall on progress made in strengthening prudential supervision and regulation, improving firms' risk management practices, enhancing disclosure and transparency, and strengthening accounting frameworks," the G7 said in the statement.