Russian official: G20 tackling too many issues, IMF reforms stalled

File Photo of Russia-Hosted G20 Banners Outdoors Before Yellow and White Facade of Historic-Looking Building

(Interfax – MOSCOW, June 11, 2013) The range of issues being considered by the G20 has gotten too broad and the Seoul agreements to recapitalize and redistribute quotas in the International Monetary Fund are not being carried out, but the group of 20 major economies has managed to resolve the problem of bailing out too-big-to-fail banks with taxpayer money, Russian Deputy Finance Minister Sergei Storchak said in regard to the first results of Russia’s presidency of the G20.

“What is the biggest disappointment of this presidency? The biggest disappointment is that we have not managed to carry out the Seoul agreements of the G20. We have not moved forward, and the Seoul agreements, and this is not only to increase the IMF’s capital, but a number of measures related to changing the system for managing this fund, still remain on paper,” Storchack told reporters.

Russia’s Sherpa to the G20, Ksenia Yudayeva also believes that reform of the global financial architecture remains the most problematic issue. “We hope that progress will be made on it within the context of the negotiations of G20 finance ministers,” she said, referring to talks scheduled for July 18-19.

The process of reforming the IMF has stalled because the United States has still not ratified the 14th reform of quotas.

“In light of this, at the summit we will probably raise the issue of having leaders reaffirm their commitment to the fact that reforms must be carried out, we need to move toward increasing the role at the IMF of new centers of economic power,” Yudayeva said.

At a meeting in Washington in April, the financial G20 affirmed its intention to reach an agreement on the formula for calculating quotas at the IMF and completing their 15th review by January 2014, as was decided at the summit in Seoul and confirmed in Cannes and Los Cabos. But it will not be possible to do this without all IMF members first ratifying the 14th review.

Russia expected that this issue would be resolved during its presidency of the G20.

Storchak said another disappointment for him was the “huge scope of events that the G20 has turned into.”

“It seems to me that the G20 risks finding itself in a situation of being overloaded,” he said. “The number of decisions that need to be made is unbelievable. However, leaders gather, as a rule, for a short period, work within the confines of a little more than 24 hours, and in this time they have to discuss and resolve controversial problems,” Storchak said.

“It’s a big disappointment that we have expanded a great deal, we suddenly have a business summit. A summit is a meeting of leaders, we now have a business summit – what is that? A G20 youth summit,” Storchak said.

He said that the job of the country holding the presidency is to take the rational from all these processes, but they are becoming so many that this is becoming a “very difficult matter.”

On the other hand, he said, a positive result of Russia’s presidency of the G20 has been the start of substantive work on finding alternative sources for financing investment. Member countries have reached an understanding that it is not possible to continue to rely exclusively on bank financing.

“The financial sector has lost touch with real life, it has begun to dominate in and of itself, the condition when it was an intermediary between investors and entrepreneurs has turned into self-domination, and it seems to me that this thought is present in the G20. This is reflected in the events that the G20 holds in establishing normal work in the area of financial regulation,” Storchak said.

He said that at the summit in St. Petersburg in September, the leaders will issue a special statement that the “problem of too big to fail has been decided once and for all.”

“No one any longer intends to bail out with the funds of national budgets private financial institutions that over-lend to unreliable borrowers, accumulate distressed assets, and then due to their influence in national economies go to the authorities and ask for incredible amounts of financial aid. We really hope that in St. Petersburg the leaders will put the matter to rest, agree with the ministers that this problem is decided. And it is key in terms of the financial crisis of 2008-2009,” Storchak said.

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