Investors must increase their volume of long-term financing in the world’s biggest economies by about $7 trillion by 2020 or risk a global slowdown, according to the Group of Thirty, a financial policy group led by former European Central Bank Governor Jean-Claude Trichet.
The need for long-term capital investment could increase from $11.7 trillion to $18.8 trillion, according to a G30 report published today. The group recommended that financial watchdogs improve governance of pension funds, develop the corporate bond market and find ways to encourage banks to buy private over government debt.
“This is critically important given that we know that the world needs to invest in infrastructure, education, R&D, housing, and business expansion in order to meet even moderate consensus growth forecasts,” Trichet, the G30’s chairman, said in an e-mailed statement.
Global regulators have sought to make the financial system safer since the collapse of Lehman Brothers Holdings Inc. in 2008 and the subsequent financial crisis. Higher capital and liquidity requirements “may also create barriers to long-term investment,” according to the G30 report. Policy-makers should “consider the impact” of regulatory change, the group said.
“Some of our proposals are challenging or contentious, and would take time to implement,” Adair Turner, chairman of the U.K. Financial Services Authority, said in the statement. “But their merits should be assessed carefully, given the importance of actions that explicitly strengthen the supply of long-term finance.”
Bonuses for fund managers should reflect performance over three years rather than one, Turner said.
The Group of Thirty brings together senior executives at private banks including Goldman Sachs Group Inc. and Banco Santander SA, central bank governors, including current ECB chief Mario Draghi, politicians and academics to discuss financial policy.
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