Last October, in the wake of severe financial crises in Asia and Russia that sent shockwaves around the world, G-7 leaders committed to work to prevent financial crises and better respond to them when they occur. Leaders have now agreed on new steps to strengthen the international financial architecture:

Stronger International Institutions and a Greater Voice for Emerging Markets

The IMF now has more powerful tools to prevent and respond to systemic crises - large-scale, fast disbursing financing and the new line of credit (CCL) to protect countries with sound policies from financial contagion. These create strong incentives to implement good policies.

Finance ministers will establish an ongoing dialogue among systemically important countries. This dialogue will include emerging countries to reflect the fact that tremors in their financial markets now reverberate in major markets around the world.

Because capital flows are global but financial regulation still rests with individual countries, we created the new Financial Stability Forum to bring together international regulators and G-7 authorities and to anticipate steps that will be needed to tackle new risks. We will expand membership in the Forum to include more key financial centers.

We agree to strengthen the IMF and the World Bank.

Enhancing transparency

Strong comprehensive standards for disclosure by governments and financial institutions will help reinforce market discipline.

Never before were details of IMF economic programs and policy-making discussions available to the public. Now, much of this will be public, along with much more data on countries.

Stronger Regulation in Lending Countries

A stronger Basel Capital Accord to make capital charges better reflect the real risk of lending, together with more focus on risk management, will encourage banks to lend more prudently.

New measures -- including greater transparency and sounder practices by lenders -- will address problems raised by hedge funds and other highly-leveraged institutions.

Equipping Emerging Market Economies to deal Better with Risk

Weak financial sectors and heavy reliance by firms and governments on short term borrowing proved a dangerous combination. Global standards and guidelines for stronger policies and stronger regulation -- in areas ranging from debt management to corporate governance to insolvency regimes -- will encourage better policies.

New policies will promote more sustainable exchange rate regimes.

Capital flows offer tremendous benefits, but they also bring risks. The new consensus on liberalizing capital flows emphasizes the importance of strengthening financial systems and prudential safeguards.

Sharing Responsibility for Crisis Resolution

A new framework sets out the range of approaches the official sector will take in facing crises - the principles that will guide decisions and the tools that will be used. This promotes appropriate "bailing-in" of private sector lenders and should help prevent contagion.

New measures -- including provisions for better debt management -- will help insulate countries from market shocks and help prevent shocks from becoming full blown crises.