FROM THE OFFICE OF PUBLIC AFFAIRS

I want to welcome everyone to Washington and thank you for attending this meeting.

The issues on our agenda this evening are critical to the health of the global economy, to the economic well being of all our countries in the years ahead, and to broadening participation in the benefits or the global economy. The Asian crisis has shown how developments in any one of our countries can have an impact on all of our countries, in the interdependent global economy and global financial markets. So, we must work together to make the most of the opportunities offered by today's global economy and global marketplace, while minimizing the risks.

This is why President Clinton and the leaders at the APEC meeting in Vancouver agreed last November to organize a gathering of finance ministers and central bank governors to move forward the reform of the architecture of the global financial system. In this meeting tonight there are representatives here from countries in every region of the world -- from both developed and emerging market economies. No matter the differences between our nations, one thing is clear: only together can we achieve a stronger, more resilient international financial system.

We are all working in a number of fora to address this challenge and to learn from the recent crises in Asia. The international financial architecture was a major item of discussion among the G-7 Finance Ministers and Central Bank Governors on Wednesday. Today, the Interim Committee of the IMF discussed several important, initial steps for strengthening the current system. Related issues are also on the agenda for the Development Committee tomorrow.

In our meeting this evening, I hope that we can explore further several key elements of this challenge -- particularly the need for greater transparency and disclosure; the task of strengthening financial systems, in individual economies and globally; and the challenge of creating mechanisms that result in private investors and creditors more fully bearing the consequences of their decisions.

Let me explain why I think these are particularly fundamental issues.

With the complex global financial markets of today, creditors, investors and policy makers need more types of information than ever before. They also need to use that information well, and appropriately balance risks and rewards. To be able to anticipate and respond to problems, creditors, investors and officials need to know about the build up of potentially unsustainable situations. They need to know about both on and off-balance sheet positions, and given the speed at which these can be built up and unwound, they need information frequently and with minimal lags.

While progress has occurred, there needs to be a substantial improvement in the quality and quantity of economic and financial information available to the public and in increasing the transparency of the IMF--including public distribution of IMF surveillance to a greater extent.

Second, recent events have further reinforced what many of us know from experience -- the importance of a strong domestic financial sector. Developing a strong financial system that is a match for the challenges of a global financial market is not an easy process. The institutions and laws that we have in the United States to supervise our own system were developed over a period of a hundred years, and nonetheless we had a severe financial sector problem with our S&L crisis in the 1980s. And now, with the pace and complexity of the global financial market, the task is even more complex.

We believe that the time has come for a more systematic approach to promoting strong national financial systems. This should include broader and more effective implementation of the Basle "core principles" for banking supervision. In addition, we believe that high quality core principles or standards should be developed and adopted in additional areas that affect the underlying strength of a financial system, including, for example, regulation of securities firms, accounting standards and disclosure practices, loan classification, credit risk assessment, bankruptcy regimes, and overall corporate governance. In conjunction with these standards, we must find ways to foster the creation of a strong credit culture and strengthen the requisite skills in a nation's financial system.

Finally, while it is an enormously complicated and difficult task, we must do our best to build effective mechanisms for creditors and investors to more fully bear the consequences of their actions. We will never be able to prevent crises from happening entirely. And when they do occur, there is an important role for the official sector, particularly the IMF and World Bank, to encourage sound policies and provide breathing room for countries as they seek to stabilize their currencies, restore market confidence, and resume growth. Among other things, such intervention can help limit the risk that a crisis will worsen or spread.

But in a world in which trillions of dollars flow through international markets every day, there simply will be not enough official financing to respond to the scale of crisis that could potentially occur. Furthermore there is a risk that by providing rapid and plentiful financial assistance in the face of crisis, the international community could shield investors from the consequences of bad decisions and thereby sow the seeds of future crises. While some protection of creditors may be an inevitable by-product of the overarching objective of restoring financial stability, this should be kept to a minimum.

I believe that our discussion here today is critically important. Ongoing dialogue among policy makers from economies across the spectrum will be increasingly important as the international community works toward reform of the architectural of the global financial markets. We all recognize that many of the issues are enormously complex, that reaching international concensus will be complicated, and that reform will not occur in one moment, but will be accomplished in pieces over an extended time. The purpose here tonight is to exchange views, to learn from each other, and to move the process forward. We do not expect to reach definitive conclusions tonight, but we do expect to issue a Chairman's statement, setting up three working groups to carry this work forward.