Mo0n5tar
29-09-2008, 06:48 PM
IMF welcomes step to reform
By Scheherazade Daneshkhu in Paris and Bertrand Benoit in Berlin
Published: September 28 2008 19:34 | Last updated: September 28 2008 19:34
Dominique Strauss-Kahn, managing director of the International Monetary Fund, on Sunday welcomed the $700bn US rescue plan as a priority in the fight to “put out the fire” engulfing the banking system.
Mr Strauss-Kahn, speaking to France’s Journal du Dimanche newspaper, said the plan should be a first step towards reform of the global financial system, as he called for greater regulation of financial institutions and markets.
“It’s because there were no regulations or controls, or not enough regulations or controls, that this situation was born,” he said. “We must draw conclusions from what has happened – that is to say regulate, with great precision, financial institutions and markets.”
However, in Germany, Peer Steinbrück, finance minister, suggested that the rescue plan could distort competition between US and European banks.
When asked about possible competitive distortions in an interview with the Spiegel news magazine, to be published on Monday, Mr Steinbrück said: “Yes, that is an issue. But I cannot yet tell you what the solution should be. We must wait and see what the US is doing.”
A spokesman for the finance ministry said the issue was not discussed at a highly confidential meeting between Mr Steinbrück and delegates from Germany’s largest banks in Berlin on Thursday. That exchange had focused on the situation of the banks’ subsidiaries in the US, he said.
“Any solution would in any case involve the European Commission and our European partners since it would probably fall under the heading of state aid,” the spokesman added.
Bernhard Blohm, chief economist at HSH Nordbank, the German state-owned regional bank, told the weekly newspaper Welt am Sonntag: “If the US banks can clean up their balance sheets, they will of course have a competitive advantage vis-à-vis all the others who will keep sitting on their risks.”
Meanwhile, Mr Strauss-Kahn said the IMF would be happy to co-ordinate the global reform process, which could begin next month when finance ministers and central bankers convene in Washington for the annual IMF/World Bank meetings.
Without the will to reform, there was a danger that the state would be seen as running to the “rescue of incompetent managers and greedy speculators”, he said, noting the criticism in parts of Europe about banking profits being privatised but their losses being nationalised.
Defending the IMF’s role in the crisis, Mr Strauss-Kahn said it had estimated in April that there would be $1,000bn in financial sector losses and had predicted a sharp slowdown in the global economy. “But people did not want to listen to us. We were criticised for being pessimistic,” he said.
Although there would be “a serious and prolonged slowdown of growth worldwide”, Mr Strauss-Kahn also sought to reassure. “The real economy is not caving in. Currencies are not falling. Central banks are handling the financial crisis,” he said.
The former French finance minister is now the favourite candidate to lead the Socialists in the 2012 French presidential election, according to an opinion poll for the newspaper.
Copyright The Financial Times Limited 2008
By Scheherazade Daneshkhu in Paris and Bertrand Benoit in Berlin
Published: September 28 2008 19:34 | Last updated: September 28 2008 19:34
Dominique Strauss-Kahn, managing director of the International Monetary Fund, on Sunday welcomed the $700bn US rescue plan as a priority in the fight to “put out the fire” engulfing the banking system.
Mr Strauss-Kahn, speaking to France’s Journal du Dimanche newspaper, said the plan should be a first step towards reform of the global financial system, as he called for greater regulation of financial institutions and markets.
“It’s because there were no regulations or controls, or not enough regulations or controls, that this situation was born,” he said. “We must draw conclusions from what has happened – that is to say regulate, with great precision, financial institutions and markets.”
However, in Germany, Peer Steinbrück, finance minister, suggested that the rescue plan could distort competition between US and European banks.
When asked about possible competitive distortions in an interview with the Spiegel news magazine, to be published on Monday, Mr Steinbrück said: “Yes, that is an issue. But I cannot yet tell you what the solution should be. We must wait and see what the US is doing.”
A spokesman for the finance ministry said the issue was not discussed at a highly confidential meeting between Mr Steinbrück and delegates from Germany’s largest banks in Berlin on Thursday. That exchange had focused on the situation of the banks’ subsidiaries in the US, he said.
“Any solution would in any case involve the European Commission and our European partners since it would probably fall under the heading of state aid,” the spokesman added.
Bernhard Blohm, chief economist at HSH Nordbank, the German state-owned regional bank, told the weekly newspaper Welt am Sonntag: “If the US banks can clean up their balance sheets, they will of course have a competitive advantage vis-à-vis all the others who will keep sitting on their risks.”
Meanwhile, Mr Strauss-Kahn said the IMF would be happy to co-ordinate the global reform process, which could begin next month when finance ministers and central bankers convene in Washington for the annual IMF/World Bank meetings.
Without the will to reform, there was a danger that the state would be seen as running to the “rescue of incompetent managers and greedy speculators”, he said, noting the criticism in parts of Europe about banking profits being privatised but their losses being nationalised.
Defending the IMF’s role in the crisis, Mr Strauss-Kahn said it had estimated in April that there would be $1,000bn in financial sector losses and had predicted a sharp slowdown in the global economy. “But people did not want to listen to us. We were criticised for being pessimistic,” he said.
Although there would be “a serious and prolonged slowdown of growth worldwide”, Mr Strauss-Kahn also sought to reassure. “The real economy is not caving in. Currencies are not falling. Central banks are handling the financial crisis,” he said.
The former French finance minister is now the favourite candidate to lead the Socialists in the 2012 French presidential election, according to an opinion poll for the newspaper.
Copyright The Financial Times Limited 2008