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Financial Sector Regulation and Supervision
(Backgrounder)

Finance Ministers and Central Bank Governors Meeting
Berlin, Germany, December 15 & 16, 1999

Why Is Improved Financial Sector Regulation and Supervision Important?

A country’s financial sector is the major channel through which borrowing and lending takes place. A poorly regulated or managed financial sector, or one with insufficient capital for the risks it takes, can increase a country’s vulnerability to financial crises.

Improved financial sector regulation and supervision can help ensure that financial institutions take adequate steps to manage risks. Appropriate financial sector policies can also help establish deep and liquid domestic capital markets, which reduce incentives for excessive external borrowing. In general, improved financial sector regulation and supervision can help prevent crises by making national economies less vulnerable to adverse developments at home and abroad.

What Is Being Done?

The international community is taking steps to help countries strengthen their financial sectors, including:

A Role for the G20

At their meeting in Berlin, G20 ministers and governors will discuss how improved financial sector regulation can help countries reduce their vulnerability to financial crises. They will also consider how they can cooperate with the Financial Stability Forum and best make use of its work in identifying factors that can contribute to crises. As well, ministers and governors will discuss the role of the international community in helping national governments take stock of the health of financial sectors in individual countries.

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Source: Department of Finance, Canada


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