April 3, 2009: G-20 Summary, Good-bye to Tax Havens?

The concluded G-20 meetings have produced a set of ambitions that investors should begin to digest.

In broad summary:

FINANCIAL REGULATIONS:

A new Financial Stability Board, with a strong mandate, will replace the Financial Stability Forum.

Financial regulation and oversight will be extended to all financial institutions, instruments and markets. This includes bringing hedge funds within the global regulatory net for the first time.

Members are committed to implement stringent new rules on pay and bonuses at a global level.

International accounting standards will be set.

Credit rating agencies will be regulated in order to remove their conflicts of interest.

A common approach to cleaning up bank "toxic assets" has been agreed upon.

TAX HAVENS:

There will be sanctions against tax havens that do not transfer information upon request.

The Organization for Economic Cooperation and Development has published a list of countries assessed by the Global Forum as acting against the international standards for exchange of tax information. The OCED has placed Costa Rica, Malaysia, the Philippines and Uruguay on its "black" list of non-cooperative tax havens. The "grey" list that are showing some cooperation include Luxembourg, Switzerland, Austria, Belgium, Singapore, Chile, the Cayman Islands, Liechtenstein and Monaco. China is on a "white" list that indicates a substantive, improved transparency, although it is apparent that Hong Kong and Macau remain in the minds of experts to be "black" list worthy.

INTERNATIONAL MONETARY FUND:

Resources available to the IMF will be increased 300% to $750 billion. This includes a new overdraft facility, or special drawing rights allocation of $250 billion. An additional $6 billion from agreed IMF gold sales will be made available for lending to the poorest countries.

A statement of support to increase lending to the world's poorest countries of at least $100 billion by multilateral development banks.

GLOBAL TRADE:

There will be a commitment of $250 billion of support for trade finance made over the next two years. This will be made available through export credit and investment agencies, as well as through multilateral development banks.

National regulators will be asked to make use of available flexibility in capital requirements for trade finance.

PROTECTIONISM:

The G20 has pledged to resist protectionism.

There is a commitment to naming and shaming countries that breach free trade rules.

The G20 will notify the World Trade Organization (WTO) of any measures that constrain worldwide capital flows.

The WTO has been called upon to monitor and report publicly on these undertakings on a quarterly basis.

FISCAL STIMULUS:

Although there is no new stimulus, the G20 stated that countries are already implementing the largest macroeconomic stimulus the world has ever seen, amounting to over $5 trillion by the end of 2010.



Times are changing. If the summary is implemented in full or in part, it is my belief that the climate for investing will significantly change. If history is an indicator, selective implementation based upon each country's self-interest will keep investors from launching too many long term speculative bets. We are not one world, yet.