The governments who have taken it upon themselves to fix the international financial system are reaffirming a common front, stabilizing an effort that appeared hobbled by competing domestic concerns.
Finance ministers and central bank governors from the Group of Seven industrialized countries meeting here said they remain committed to the goal of designing a regulatory regime sturdy enough to avoid a repeat of the financial crisis.
“I took, personally, great comfort in what I heard around the table,” Bank of Canada Governor Mark Carney told reporters after the meetings in Canada's northernmost capital.
Such assurance wasn't possible only a few days ago. Disparate regulatory proposals appeared to undermine the goal of achieving an international consensus on capital requirements, diminishing the threat large institutions pose to the financial system and eliminating the assumption that the state will always rescue the biggest banks in an emergency.
While officials said they're uniting to tackle financial reform, putting common measures into place could prove harder.
The challenge now is following through on international standards that will leave the financial system more resistant to shocks.
Officials have promised new bank-capital standards by the end of the year.
It is a difficult proposition because the rules must reflect country differences without presenting banks with an incentive to seek jurisdictions with the weakest rules. And G7 officials said they made progress during the weekend meetings on a plan to make financial institutions cover the cost of future bailouts rather than taxpayers.
“They are into the most difficult phase of international regulatory change,” said Eric Helleiner, the chair in international governance at the Centre for International Governance Innovation in Waterloo, Ont. “The G7 has an important role at this particular moment on this particular issue.”
As officials from Berlin, London, Ottawa, Paris, Rome, Tokyo and Washington landed at the Iqaluit Airport's tiny mustard yellow terminal on Friday afternoon, investors were ending another tumultuous day of trading that left S&P 500 index lower for a fourth consecutive week. Fears of a debt crisis have flared up in Europe, where soaring government debt loads in Greece, Spain and Portugal have triggered worries about ripple effects through the broader economy.
G7 officials said they're keeping a close eye on Greece. Alistair Darling, Britain's Chancellor of the Exchequer, said Greece must “stick to its plan” to reduce debt.
Mr. Darling and other finance leaders said countries will continue with heavy stimulus spending in order to ensure the global economy continues to gain traction. “We're absolutely committed to maintaining support for our economies until the recovery is firmly established,” Mr. Darling said.
The entire summit barely lasted 24 hours. Officials met between dinner of arctic char and caribou medallions on Friday and a lunch of musk-ox minestrone soup and caribou tourtière on Saturday.
When it was over, the community poured en masse into the town's high school for a celebratory feast with dancing and games. Finance Minister Jim Flaherty won warm applause with his effort to thank them in Inuktitut and was given a new seal skin vest.
Mr. Flaherty was determined to set the G7 on a more casual track, insisting on an informal dress code and holding some of the talks around a fireplace. He scrapped the tradition of issuing a statement at the end of the meeting, which avoided the perception of competition with the G20, which includes emerging economic powers such as China, India and Brazil, and now has unofficially overtaken responsibility for managing the global economy. China was barely mentioned on the weekend, even though the G7 countries all remain frustrated by its refusal to allow the yuan to strengthen.
Still, Canadian officials argued the G7 should at least set the tone for banking and insurance rules and can react quickly to any financial crisis, since its members are home to the major financial centres and govern the majority of the world's biggest banks.
Before the meeting there was uncertainty over whether the world's financial powers had a coherent plan to correct the regulatory lapses that contributed to the collapse of credit markets in the autumn of 2008.
President Barack Obama's proposal late last month to block U.S. banks from using their deposits to speculate on financial markets and bar them investing in hedge funds and private equity peers was far more aggressive than any other economic power was contemplating.
Britain's Mr. Darling, among others, was skeptical, raising doubts that the G7 was capable of coming up with a unified approach. At the same time, Mr. Darling is going ahead with a one-time tax on bankers' bonuses. France is keen to follow, while Finance Minister Jim Flaherty remains steadfast against charging any new levies to Canada's banks and bankers.
Unity is important because without it authorities will struggle to overcome resistance from the banking industry, not to mention the inertia that naturally sets in as negotiations become difficult and memories of the events that triggered the attempt at regulatory overhaul fade, say academics who have studied previous financial reforms.
The anxiety, triggered mostly by Mr. Obama's proposal to curb proprietary trading, was the result of confusion over what constitutes a common approach to financial regulation.