13 August 2014: UN Secretary-General Ban Ki-moon has issued a report on the ‘International financial system and development.’ Submitted in response to UN General Assembly (UNGA) resolution 68/201, the report reviews recent trends in international official and private capital flows to developing countries, as well as efforts to strengthen the international financial system “towards the post-2015 development agenda.”

The report highlights challenges in the areas of financial regulation, sovereign debt distress, the global financial safety net, multilateral surveillance, policy coordination, and governance reform of the international financial institutions. It also reiterates the need for significant mobilization of resources from a variety of sources, and for the effective use of financing to promote full and productive employment and decent work for all.

According to the report, although regulatory reforms launched in the wake of the financial crisis significantly reduced some important risks in the financial system, a number of structural flaws, regulatory gaps, barriers and misaligned incentives continue to pose risks to financial stability. Many private financial flows remain short-term oriented and subject to bouts of extreme volatility, while official development assistance (ODA) and other forms of official flows risk being affected by greater fiscal austerity and sovereign debt problems in developed countries, the report finds.

The report notes that, even though long-term financing will be essential to raise the resources required for achieving the post-2015 development agenda, the international financial system has failed to adequately allocate resources for long-term sustainable development needs. There has been insufficient investment in critical areas, such as infrastructure, small and medium-sized enterprises (SMEs) and financial services for all, the technologies necessary to address climate change in both developed and developing countries, and health, education, and sanitation services for the world’s poor.

Finally, the report stresses that, in order to achieve the post-2015 development agenda, the financial system needs to intermediate credit toward sustainable development in a stable manner. [Publication: International Financial System and Development: Report of the Secretary-General]