Germany has concrete G7 plans for financial markets

German finance officials will arrive in Tokyo for a G7 meeting this weekend with clear proposals to improve the transparency of financial markets, deputy finance minister Thomas Mirow said here Tuesday.
Propositions to finance ministers of the Group of Seven industrialised countries would focus on three issues, Mirow told journalists at a briefing.
First would be "the role of ratings agencies," which were severely criticised for not having foreseen the meltdown of the US market for high-risk -- subprime -- mortgages.
"How is it that the agencies apply the same ratings to evaluate the ability of a company or country to repay its debts, and risks linked to securitised instruments," which are complex financial packages backed by subprime loans, the German official asked.
The financing of ratings agencies by the same companies they were supposed to evalute also posed a problem, Mirow said.
Secondly, Berlin was to suggest increasing liquidity obligations linked to the issuance of securitised financial products, that is, on the reserves to be held by banks that issued such instruments.
Finally, Germany would also propose measures on accounting rules, the deputy finance minister said.
He said that details of the plans had been discussed at length with French finance officials, "even though they are not strictly speaking Franco-German proposals."
Mirow estimated that the International Monetary Fund should also play a more important role in observing financial markets and issuing alerts as crises began to emerge.
He noted that the IMF had "called attention several times" to the US market for high-risk mortgages before it collapsed in July and August last year but only "in a very reserved manner."
Mirow also spoke about reform of the IMF, one of the topics to be discussed by G7 ministers.
The German official said there had been significant convergence of views among member countries ahead of the meeting.
"A tripling of votes to be accorded to developing countries is emerging" as a possible proposal, Mirow said.
"But emerging countries are not the only ones under-represented," he added, citing Spain and Ireland as other examples.
The German official also evoked funding for the IMF.
The Fund, which has cut back its lending to countries, has seen revenues fall as a result and "has some concerns over its financing," he said.