The G20 worked well at the outset of the global financial crisis. It gave key member states an opportunity for concerted action that began an entire chain of financial and regulatory reconstruction efforts. However, six years on from the onset of the crisis, this week’s G20 Finance Ministers meeting in Mexico City is missing two key players, the United States and Brazil. Is this simply bad timing or a signal that this forum is losing its utility and influence in debating and deciding the shape of the global financial system of the future?

At this stage in the economic and regulatory cycle, it is natural that the nitty-gritty of implementation overtakes the grand policy statements of earlier meetings, and that domestic and regional concerns overtake international themes as growth issues dominate domestic political agendas. In addition, leaders first did what they could with most agreement, leaving the most difficult and contentious issues, such as cross-border resolution, for last.

However, this leaves us with a half-baked cake. Increasingly, states are fragmenting in their approach to financial structure. The US has the Volcker rule, the EU the Liikanen Report and the UK the ring-fencing proposal of the Independent Commission on Banking, while taxes on financial transactions are moving ahead in some jurisdictions and are rejected outright in others.

Fundamentally, this is because views on the efficiency of markets, the role of government and the philosophy of regulation vary markedly across jurisdictions. As Raghuram Rajan states so eloquently in his book Fault Lines, “because different financial systems work on different principles and involve different forms of government intervention, they tend to distort each other’s functioning whenever they come into close contact.”

In spite of talk of convergence, there has been little progress on these larger philosophical issues, including what do we want our financial system to do? Unless, and until, these larger issues are addressed, convergence will exist only on a superficial level, financial institutions will continue to presume that the market will determine their future shape, short-termism will predominate, and we will continue to sow the seeds for the next crisis.

Some would call for a new Bretton Woods, but what we really need is a way to encourage innovative, dynamic and creative thinking on how to create and govern a financial system that is fit for purpose in the 21stt century. The G20 is not the place for this.

Author: Barbara Ridpath is Chief Executive of the International Centre for Financial Regulation and is a member of the Global Agenda Council on Global Financial Systems.

Image: People walk near a sign of the G20 summit on a beach in Los Cabos REUTERS/Mariana Bazo