Progress on financial regulatory reform is clear. US and UK leaders, at the crisis epicentre, must respond to visceral public anger towards banks, the activities of which severely damaged the real economy to the extent that full recovery will take years.

There has been some progress, such as regulators raising the amount of capital banks must hold to cope with future bad debts. Nevertheless, additional measures are still needed to get taxpayers off the hook for future financial rescues and resolve problems in institutions with extensive cross-border ties. At Seoul, leaders will add a capital surcharge on the largest banks. Taken together, these actions will leave banks with smaller profits and less free capital to invest.

Banks will be safer but will another financial crisis be prevented? Continued financial innovation suggests the answer is ‘no.’ Already there are signs of financial activity migrating beyond regulators’ reach to the ‘shadow’ financial sector of hedge funds and private equity players.

With little time remaining before the Summit there is more to do on other issues. The argument over imf governance reform must be resolved. And the central task of rebalancing global growth requires political will and an agreed process of peer review.

The IMF’s mutual assessment process got off to a good start at the Toronto summit in June by mapping out needed changes. G7 governments engaged in a similar exercise in the 1980s, using the IMF to prod them along with its technical advice.

Current IMF credibility is damaged by its perceived role in the Asian crisis. Leaders have restored its financial resources sufficiently for it to provide financial safety nets, but its support of the mutual assessment process is analytical. A more active role could help move rebalancing along. At Seoul action is required, as the G20’s credibility is at stake.

A Bank of Canada study in September this year shows a $7 trillion potential shortfall in global economic output by 2015 if G20 governments fail to cooperate on adjustment and leave it to market forces. Current account surplus countries agreed at Toronto to shift reliance from foreign to domestic demand through such measures as infrastructure spending, changing the incentives for households’ precautionary saving and increasing exchange rate flexibility. Political will is needed to cooperate rather than self-insure by managing exchange rates and accumulating foreign exchange reserves. bilateral tensions between the United States and China over their adjustments (a credible plan for fiscal consolidation in the US and more exchange rate flexibility in China) do not help.

G20 credibility is on the line for another reason as well. It is remarkable that trade does not appear on the Seoul agenda. Yet what could be more important to closing the development gap than completing the Doha development round at the World Trade Organisation to expand market access for developing countries selling into growing world markets?

Trade specialists can identify a package of measures that would conclude Doha. The issues are sufficiently technical that leaders cannot intervene directly. But they must give the go-ahead to complete the package. The five key players—the United States, Europe, China, India and Brazil—are all G20 members. Major political transitions or elections scheduled in a number of countries in 2012 suggest that a unique window of opportunity is open to complete the negotiations in 2011. It will then close soon thereafter.

The ‘Catch-22’ for Seoul is that leaders who should give more weight to the global interest are preoccupied with their own political issues. Determined leadership by the summit chair could change this.

President Lee Myung-Bak should pick up the phone or get on a plane, whatever is required, to twist arms and encourage agreement and action on the pressing issues, balancing interests sufficiently to conclude the Doha round, and policy changes that will rebalance global growth. A smaller outcome in Seoul not only increases the chances of more crises but suggests the G20 is a talk-shop when it comes to preventing them.

This is an article from the most recent edition of the East Asia Forum Quarterly, ‘Asia and the G20′.