The Finance Ministers and Central Bank Governors of the countries of the Group
of Ten met in Washington, D.C. on 25 September 2005. Thierry Breton, Minister
of the Economy, Finance, and Industry of France and current Chairman of the
Group of Ten, presided. Ministers and Governors took note of reports from Sir
Andrew Large, Chairman of the Deputies of the Group of Ten, Lorenzo Bini
Smaghi, Chairman of Working Party No. 3 of the OECD and Malcolm Knight, General
Manager of the BIS.
Ministers and Governors discussed the implications for financial markets and
economic policies of pension system reform in the context of ageing
populations, on the basis of a report prepared by an experts group at the
request of the G10 Deputies, which will be publicly available. They underlined
that efforts to mitigate the direct fiscal impact, via public pension systems,
of population ageing, have tended to involve higher contributions, lower
replacement rates, later retirement and/or higher labour market participation
rates. Partly as a result, private retirement schemes have grown rapidly in
most G10 members, although their importance still varies widely. Some Ministers
and Governors noted that, against this backdrop, retirement savings may
increasingly influence financial market behaviour, making it important that
regulation and supervision support the trend towards more rigorous risk
management, adequate plan funding, greater transparency and better governance.
Some Ministers and Governors saw scope for growth of some markets and financial
instruments useful for retirement savings, with a potential supportive role for
governments, and some considered that the shift of investment risks onto
individuals meant that protection of pension beneficiaries needed to be weighed
carefully.
Ministers and Governors recognised that changes in the age structure of
populations will tend to have a bearing on the conduct of monetary policy over
time, but did not see this as requiring specific policy interventions or
changes in the monetary policy framework. Generally, they noted that policy
responses can involve tradeoffs, such as between free choice of investments and
effective prudential control or between maximising returns and ensuring secure
retirement incomes. Striking the right balance between such competing
objectives is largely a matter of social preference, and it is not to be
expected that all countries will make the same choices. However, some Ministers
and Governors felt that financial education and the provision of information
about savings instruments may need strengthening. In addition, it was felt that
consistency between funding requirements and accounting standards should be
pursued, as well as between some pension fund and insurance company
regulations.
Ministers and Governors discussed the issue of financing of terrorism. They
affirmed their commitment to the implementation of existing standards and
recommendations on combating the financing of terrorism. They stressed the
significance of international co-operation, including sharing of best practices
and the need for technical assistance to foster compliance with internationally
agreed standards. To that end, Ministers and Governors recognise the importance
of co-operation with the financial sector as well as among international
organisations. They noted the importance of giving priority to capacity
building through the coordinated delivery of prioritised and efficient
technical assistance by the international financial institutions.
The Minister of the Economy and Finance of Italy was elected Chairman of the
Group of Ten for the coming year.