A thinktank of current and former regulators has called for far-reaching reforms in the international financial system to address potential future capital shortfalls around the world.

A report from the Group of Thirty, Long-Term Finance and Economic Growth calculates major economies may need to raise almost $19 trillion (£12 trillion) in long-term investment funding by 2020, compared to around $12 trillion in 2010.

The group wants to see international and national financial regulatory bodies develop new approaches which it says should 'ensure that investors are better able to take a long-term horizon in their investment decisions'.

Adair Turner, chairman of the Financial Services Authority, and a member of the Group, said: 'Some of our proposals are challenging or contentious, and would take time to implement. But their merits should be assessed carefully, given the importance of actions that explicitly strengthen the supply of long-term finance. p>

'For example, we are proposing that the Financial Stability Board explores the feasibility of new regulatory and accounting treatments for assets held with long-term horizons to avoid excess focus on short-term market volatility.'

The report says options to consider include removing the tax deductibility of interest payments on debts, while also lowering the marginal tax rate for companies, in order to make investment in equities more appealing. Alternatively, tax deductibility could be applied to dividends on shares while the marginal rate was increased.

They also call for incentive pay to be reconfigured to ensure a focus on longer-term returns. It proposes portfolio managers' bonuses could be conditional on their performance over a defined period, which for senior managers would be a minimum of three years.