G7 pushes for private sector help in crises

FINANCE MINISTERS of the Group of Seven industrial countries will agree plans at their meeting in Washington on Monday to make private lenders share the burden of tackling future international financial crises.

The move, signalled in separate speeches yesterday by Gordon Brown, the Chancellor of the Exchequer, and Robert Rubin, the US Treasury Secretary, is among a wide-ranging package of measures to reform the international system following last year's financial market crisis.

New codes of conduct in the provision of information by governments and a planned International Monetary Fund (IMF) credit line for countries in danger of falling victim to financial contagion will also get the go- ahead from the G7 next week.

The Chancellor said there must be a partnership between private lenders and public sector organisations in order to maintain confidence in crisis- hit countries. He will call for specific proposals for burden-sharing to be agreed by the end of this year.

"It is in the interest of the private sector that there be clear rules of the game which create the confidence that all investors will be treated equally and there is no advantage in being the first to get to the door," he said.

Mr Rubin laid less emphasis on a formal set of new arrangements, but said a "powerful programme" of reform was planned. He joined Mr Brown in saying bond contracts should contain majority clauses making co-ordination between lenders easier.

Mr Rubin added: "There is no reason why one category of unsecured private creditors should be regarded as inherently privileged relative to others .. Claims of bondholders should not be viewed as necessarily senior to claims of banks."

Mr Brown will also propose to other G7 ministers a new surveillance unit at the IMF to co-ordinate the data and information gathered by international institutions.

This would join the new financial stability forum, which co-ordinates the work of national and international bank financial market regulators and met in Washington for the first time last week.

Mr Brown and Clare Short, the international development minister, will be urging the G7 to speed up and extend the debt relief initiative for poor countries.

Ms Short will tell a conference in London tomorrow that the decisions taken next week will be "decisive" for the future of the world's poorest and most indebted nations. A new combined EU debt initiative is on the drawing board.

However, the G7 agenda is likely to be dominated by international financial reform. Mr Brown said yesterday that the fading of the crisis had not made reform less urgent. "There is no point in waiting for the next crisis before making the necessary reforms," he said.

His remarks were echoed by Michel Camdessus, managing director of the IMF. Speaking in Washington yesterday, he said: "The situation is better but there is no room for complacency."