Discussions are set to intensify over the coming weeks on measures to reform the international financial system. International leaders addressing the opening session of the International Monetary Fund and World Bank annual meetings have highlighted the need for reform, a call supported strongly by the administration of US President Bill Clinton.

The G-22 group of countries - comprising of the main developed economies and the larger developing economies - has come up with a set of proposals which are now set to be considered.

Another set of proposals, drawn up by the interim committee of the IMF - the body's main policy making committee - is to be forwarded to all international lending institutions and to the governments of emerging economies.

The proposals are aimed at preventing future crises on the financial markets and at preventing any further spread of the current crisis to Latin America. The new moves also involve intensive discussions on a support package for Brazil, which is likely to be announced over the next week. The US and other western economies are concerned to ensure that countries in difficulty do not fall back on reneging on debt repayments or setting up capital controls as Russia and Malaysia have done.

The new proposals for reform of the international financial system rest on number of key principles, as outlined by the IMF's interim committee. The golden rule is to be transparency, in other words a much greater level of information for investors and for financial regulators. This does not just apply to emerging economies, which will have to detail the level of short-term private and public debts, but also to financial institutions such as hedge funds, which will have to reveal the extent of their exposure on various economies. International institutions such as the IMF itself will also be pressed to become more open.

The second is strengthened banking and financial systems, through tighter regulation and supervision.

The involvement of the private sector in assisting rescue packages and supporting emerging economies is another principle.

It is believe to be essential that western bankers do not believe that they can lend with impunity to emerging economies only to be bailed out by the IMF or another institution if anything goes wrong. Discussions on a reform programme will also focus on liberalisation of financial markets. But in this area, there is a marked change of emphasis. Gone is the "mantra" that all capital must be totally free and uncontrolled.

As President Clinton repeatedly stressed, the liberalisation of capital flows must proceed in a prudent and orderly manner. Addressing the IMF and World Bank meeting yesterday, he pointed to the social crisis which unrestricted capital flows have caused.