G20 Urged to Tighten Financial Oversight

Report Also Calls for Higher Bank Capital Requirements

A report from an advisory group to the Group of 20 industrialized and developing countries is recommending broad reforms of the global financial system, including tighter regulations of hedge funds and rating agencies as well as higher capital requirements for banks.

The report is one of four on financial regulations and reform of multilateral lenders to be prepared ahead of a major summit in London of world leaders, including President Obama, on April 2. Many of the 24 recommendations in the report are likely to be drawn upon in a final accord on how to combat the global financial crisis, according to sources familiar with the report.

The recommendations -- first published by the British Web site BreakingViews.com -- build on ideas that have been floated by various nations for months. The report attempts to set more specific goals for leaders. It recommends, for instance, that each nation require hedge funds to register and report regularly on their size, investment style, borrowing levels and performance.

It also echoes previous calls to beef up the Financial Stability Forum in Switzerland, an organization that brings together central bankers and regulators from several of the world's largest economies. A new college of supervisors at the FSF would allow regulators from various nations to compare notes on banks with a global reach, helping them identify systemic risks to the world financial system. The report also calls for establishing more uniform accounting standards and setting new international standards that would compel banks to maintain more capital after the economic crisis passes.

European diplomats in particular hailed the report as a step toward international consensus on tighter financial regulation in the wake of the lapses that are blamed for helping cause the global financial crisis.

Yet many of the recommendations are broad outlines of previously stated goals to tighten regulation and leave the details to each nation to develop individually. The language may be broad on purpose, analysts say, to make sure that a host of nations -- some with very different notions on how to fix regulation -- are able to reach agreement on April 2.

"It's very broad, but that's probably the only way they're going to get everyone to agree on it on April 2," said Simon Johnson, a former chief economist at the International Monetary Fund who is now an economics professor at the Massachusetts Institute of Technology.