5th November, 2001. A group of former finance ministers from emerging market countries will today propose fundamental changes to the global financial system, including an international bankruptcy procedure for government borrowers.

Their report reflects a feeling that the current system places emerging markets at the mercy of fickle capital flows, and that - as in Argentina - there is no agreed procedure to get countries out of trouble.

Domingo Cavallo, the Argentine finance minister struggling to reschedule his country's Dollars 132bn (Pounds 90bn) of government debt, was originally a member of the team that produced the report, though he left when he took up his ministerial post.

The report from the "emerging markets eminent persons group" - chaired by Il SaKong, former Korean finance minister, with co-chairman Roberto Zahler, foreign president of the central bank of Chile, Manmohan Singh, former Indian finance minister, and Kwesi Botchwey of Ghana - says emerging market countries have done a great deal to put their own houses in order.

But these actions - including stronger supervision of financial institutions, better macroeconomic management and improved transparency, "are not sufficient to provide an assurance of market stability", the group said. "International action on a co-ordinated basis is also required."

The report makes 33 recommendations for action, most of which involve greater role for international co-ordination and controls on private sector investors.

It calls for the International Monetary Fund and the Group of Seven industrialised countries to support standstills on debt payments to private creditors for countries in financial crisis.

In the longer term it suggests exploring an international version of the US Chapter 11 bankruptcy procedures to allow orderly restructuring of sovereign debt contracts. Some emerging market countries, particularly in Latin America, have opposed such a procedure, fearing investors would stop lending to them.

In an implicit critique of the "Washington consensus" on free capital flows, the report says governments should be allowed to place temporary restrictions to stop hot money destabilising countries. And it calls for greater actions from the IMF and World Bank in boosting liquidity when required and issuing guarantees for emerging market countries borrowing in international capital markets.

C. Fred Bergsten, director of the Institute for International Economics in Washington and adviser to the report, said: "This is a provocative report which attempts to push back the boundaries of what is realistic. Recent events have increased the possibilities for change on these issues,"

Since the end of the Asian crisis in 1997-8, a range of proposals to promote greater financial stability have been proposed by the Financial Stability Forum (FSF), a global grouping of central banks, finance ministries and banking supervisors.

But Manuel Montes, programme officer at the Ford Foundation which funded the group, says: "All the FSF reforms proposed so far were aimed at the emerging economies themselves. It should be clear that this is not enough." For more reports see www.ft.com/globaleconomy