Following their meeting in Osaka, Japan over the weekend, the finance ministers of the G-8 countries, indicated that market conditions seem to be improving, but risks remain, and the global economy faces numerous headwinds. They called for continued action to shore up the global financial system.

“We remain positive about the long-term resilience of our economies and emerging market economies are still growing strongly. However, the world economy continues to face uncertainty and downside risks persist,” they said in a statement. “Further declines in housing prices in the United States and greater strains in the financial markets may adversely affect the global outlook. Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable, and may increase global inflationary pressure.”

The ministers indicated that financial market conditions have improved somewhat in the past few months. “However, strains remain, especially in money and credit markets. The recent financial turmoil has revealed the risks posed to the financial system by excessive risk taking and leveraging. Financial innovation has contributed significantly to the global growth and development, but in the light of risks to financial stability, it is imperative that transparency and risk awareness be enhanced,” they added.

To that end, they said they will be implementing recommendations from the Financial Stability Forum, and they called for similar efforts from the industry and other global authorities.

“We call for continuing efforts by financial firms to improve disclosure and risk management practices, and to enhance their capital base as needed. We call on the IASB to accelerate its reviews of accounting issues around off-balance sheet entities and valuation in illiquid markets. We welcome the revised IOSCO code of conduct for credit rating agencies, the steps national supervisors have taken to encourage better disclosure by financial institutions in their mid-year reports, and the imminent release by the Basel Committee of their sound practice guidance on liquidity risk management,” they said, adding that they are also looking forward to work on mitigating pro-cyclicality in the financial system, and for progress on closer co-operation between the IMF and the FSF on reinforcing early warning capabilities.

The ministers also said that they welcome ongoing discussions on mutual recognition of comparable securities regimes and encourage further progress on facilitating cross-border financial services.

Additionally, they expressed concerns about rising oil and food prices, and they stressed that “urgent and concerted action is needed and accept our responsibility to show leadership in tackling climate change”.

In response, the Securities Industry and Financial Markets Association praised the finance ministers for their attention to issues involving the global economy, and financial services, specifically. “We applaud the G-8’s focus on current issues in the credit and securitization markets, which will help drive the global agenda and ensure that market participants in the sector return to a more robust, more transparent and more liquid environment,” said Bertrand Huet, managing director, and SIFMA’s European legal & regulatory counsel, adding that SIFMA and its EU and U.S. affiliates are actively developing initiatives that will be complimentary to the G-8 recommendations.

“The G-8 continues to put its weight behind some of the most important global business issues of our day. Their focus on mutual recognition acknowledges the pressing need for practical reforms to address regulatory obstacles to the efficient delivery of cross-border services by securities firms. Their efforts to achieve a successful and commercially meaningful Doha Round are equally appreciated, given the important standards that are set for financial services and capital markets sectors within that framework,” added David Strongin, managing director of SIFMA.