Ministers and central bank governors from the G7 are getting ready for talks in Washington next weekend, where they will debate an overhaul of the global markets regime in response to the recent months’ financial turmoil. The global lobbying group for investment banks, the Institute of International Finance (IIF), urged policymakers not to impose hasty measures that could curb the dynamism of financial markets. The IIF’s Managing Director, Charles Dallara, said “It would be unfortunate if the result of the market strains in the last few months was a swing of the pendulum into the arena of overregulation. The last thing we need is a blanket which stifles innovation in financial markets.”

The warning from the institute came amid hints of a rapid build-up of momentum within the G7 for action next week during the annual meeting of the International Monetary Fund (IMF) to crack down on slack lending practices by big institutions, and to foster greater transparency over the use of complex financial instruments. Alistair Darling, the Chancellor, said that at next week’s G7 talks he would press for “faster, rapid implementation of international agreements on solvency; accelerated work on international standards for regulating liquidity; more transparent information on credit ratings; and action to improve the transparency of off-balance sheet vehicles”. In a statement on the Northern Rock debacle, Mr Darling said that he would also call for an “early warning system” to alert regulators to market threats that should operate through the IMF and the Basle-based Financial Stability Forum (FSF) - a body reporting mainly to the G7. FSF has already set up a working group to propose new measures to strengthen market oversight.

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