Key emerging economies want financial system overhaul

The world's top emerging economies -- Brazil, Russia, India and China -- want "a reorganization of the world financial system," Brazilian Economy Minister Guido Mantega told reporters Friday after meeting his counterparts from the other countries.

The joint position by the so-called BRIC countries was worked out on the eve of a G20 meeting of finance ministers and central bankers in Sao Paulo that is seen as a precursor to an emergency G20 heads of state and government summit in Washington on November 15.

Mantega, summarizing discussions with finance ministers from Russia, India and China, said "we have come to the conclusion that there must be a reformulation, a reorganization of the world financial system."

Specifically, he said, the system put in place by the 1944 Bretton Woods agreement was outdated and needed to be changed to take into account the greater economic importance of emerging nations.

The G7 -- Britain, Canada, France, Germany, Italy, Japan, the United States -- "is not sufficient," he said.

The emerging nations want to see the G20 -- which includes the G7 and the BRIC countries, plus other significant economies such as Australia, Indonesia and Turkey -- reinforced and elevated to a heads-of-state and heads-of-government level, above the finance ministerial status it currently has.

A joint statement by the BRIC finance ministers said they would "continue to take all necessary steps to lessen the impact of the recent turmoil on economic activity, aiming to preserve medium and long-term growth."

They stressed "there is an urgent need to find mechanisms... to restore the real economy's access to credit, stimulate demand and to resume capital flows."

The central banks of several emerging nations have already stepped in to shore up their currencies, which have taken a beating in the past few weeks as foreign investors have fled because of the crisis.

The BRIC ministers put the blame for the current crisis with the world's most advanced economies, noting that it began in the United States and quickly spread to Europe.

"The crisis revealed weakness in risk management, regulation and supervision in the financial sectors of some advanced economies," the joint statement said. "Therefore we call for reform of regulatory and supervisory frameworks, as well as clearer rules and transparency."

Mantega berated international financial institutions such as the World Bank, which he said "didn't detect the crisis in time."

The joint statement said the BRIC countries wanted a reform of the International Monetary Fund and the World Bank to give more balance "between advanced and developing countries."

Mantega said "there is no lack of proposals" for reform for the weekend G20 meeting to consider, explaining draft texts from Australia, Brazil, Britain, France and Russia would be circulated.

"All go in the same direction," he said.

He said that G20 working groups would probably be formed after the meeting to look at establishing new norms for derivatives, investment banks and other issues targeted for an overhaul.

The Brazilian minister said the 100-day deadline the European Union wanted to impose for concrete changes to the financial system following next week's G20 summit was "reasonable," although he predicted that many processes would "take quite some time" beyond that.