The Group of Twenty (G20) was established in September 1999 as a direct response to the series of financial crises that swept across emerging markets during the late 1990s.
Its formation represented a fundamental recognition that the existing global financial architecture was inadequate for managing crises in an increasingly interconnected world economy.
The G20 emerged from the initiative of Canadian Finance Minister Paul Martin and US Treasury Secretary Larry Summers, who conceived the forum following their analysis of the financial turmoil that had engulfed multiple regions.
The founding architects recognised that the traditional Group of Seven (G7) was insufficient to address the global nature of modern financial crises and the growing economic importance of emerging markets.
The Mexican Peso crisis of 1994 had already highlighted vulnerabilities in emerging market economies and their susceptibility to capital flight.
This served as an early warning signal that existing international financial mechanisms were inadequate for preventing and managing such disruptions.
The most significant catalyst for the G20's creation was the Asian financial crisis, which began with Thailand's devaluation of the Baht in July 1997.
The crisis rapidly spread across East and Southeast Asia, affecting currencies and equity markets, and creating severe balance-of-payments pressures in countries including Malaysia, Philippines, Indonesia and South Korea.
The contagion effect demonstrated how financial instability could quickly transcend national borders, affecting global trading partners and creating systemic risks.
The Russian financial crisis of August 1998 further compounded global financial instability when Russia announced a devaluation of the Ruble and declared a moratorium on debt repayments.
This crisis had far-reaching implications, affecting not only emerging markets but also advanced economies.
The near-collapse of the prominent US hedge fund Long-Term Capital Management (LTCM) in autumn 1998 brought the crisis directly to American shores.
LTCM's massive exposure through derivatives trading ($1.25 trillion in off-balance sheet transactions) created systemic risks that required Federal Reserve intervention to prevent catastrophic consequences for the global financial system.
The G20 was formally announced on 25 September 1999, with the stated objective to "broaden the dialogue on key economic and financial policy issues among systemically significant economies and promote cooperation to achieve stable and sustainable world economic growth that benefits all".
The inaugural meeting took place on 15 and 16 December 1999 in Germany, hosted by German Finance Minister Hans Eichel and chaired by Canadian Finance Minister Paul Martin.
The membership selection was conducted by Eichel's deputy Caio Koch-Weser and Summers' deputy Timothy Geithner, who systematically reviewed potential members based on economic significance and regional representation.
Initially operating at the technical level of finance ministers and central bank governors for nearly nine years, the G20's profile was dramatically elevated following the 2008 global financial crisis.
The collapse of Lehman Brothers in September 2008 created an emergency situation that prompted US President George Bush to convene the first G20 Leaders' Summit in Washington.
This elevation to heads of state and government level marked a crucial transformation, with the G20 being designated as the "premier forum for international economic cooperation" during the Pittsburgh Summit in September 2009.