Communiqué

Washington, D.C., September 25, 2005

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.