The Group of 20 (G20) leaders agreed Friday to strengthen international financial regulatory system to avoid future crisis.

In the Leaders' Statement released after the summit, the G20 leaders reaffirmed that one of the major roots of the current financial crisis lies in the lack of regulation.

"Major failures of regulation and supervision, plus reckless and irresponsible risk taking by banks and other financial institutions, created dangerous financial fragilities that contributed significantly to the current crisis. A return to the excessive risk taking prevalent in some countries before the crisis is not an option," said the statement.

The statement said that since the onset of the global crisis, the group has developed and begun implementing sweeping reforms to tackle the root causes of the crisis and transform the system for global financial regulation. Substantial progress has been made in strengthening prudential oversight, improving risk management, strengthening transparency, promoting market integrity, establishing supervisory colleges, and reinforcing international cooperation.

The G20 leaders have enhanced and expanded the scope of regulation and oversight, with tougher regulation of over-the-counter (OTC) derivatives, securitization markets, credit rating agencies, and hedge funds. The leaders endorsed the institutional strengthening of the Financial Stability Board (FSB) through its Charter, following its establishment in London, and welcomed its reports to leaders and ministers. The FSB's ongoing efforts to monitor progress will be essential to the full and consistent implementation of needed reforms.

Despite the progress, the G20 leaders said "our work is not done."

The statement said that far more needs to be done to protect consumers, depositors, and investors against abusive market practices, promote high quality standards, and help ensure the world does not face a crisis of the scope we have seen.

"We are committed to take action at the national and international level to raise standards together so that our national authorities implement global standards consistently in a way that ensures a level playing field and avoids fragmentation of markets, protectionism, and regulatory arbitrage."

"The steps we are taking here, when fully implemented, will result in a fundamentally stronger financial system than existed prior to the crisis," the statement said.

Again, the leaders stressed the importance of international cooperation. "If we all act together, financial institutions will have stricter rules for risk-taking, governance that aligns compensation with long-term performance, and greater transparency in their operations."

The leaders asked the international accounting bodies to redouble their efforts to achieve a single set of high quality, global accounting standards within the context of their independent standard setting process, and complete their convergence project by June 2011.

The statement said that the group's commitment to fight non-cooperative jurisdictions (NCJs) has produced impressive results.

"We are committed to maintain the momentum in dealing with tax havens, money laundering, proceeds of corruption, terrorist financing, and prudential standards."

The G20 leaders tasked the IMF to prepare a report for next meeting with regard to the range of options countries have adopted or are considering as to how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system.

The Pittsburgh summit is the third of its kind following the previous two gatherings in Washington last November and in London in April this year in the aftermath of a severe financial crisis and economic downturn around the globe.

(Xinhua News Agency September 26, 2009)