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22 November 2010

IMF: Europe needs reforms to break shackles of low growth


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Strauss-Kahn welcomed progress on new global banking rules, but said there is a long list of problems that has not been resolved. Countries still need to strengthen the supervision of the rules and resolve unviable financial institutions, particularly cross-border banks.


Strengthen supervision of financial sector

Speaking on a panel with U.S. Federal Reserve Chairman Ben Bernanke, European Central Bank President Jean-Claude Trichet, and Brazil’s central bank President Henrique Meirelles, the IMF managing director said work is under way on these tougher issues but it needs to speed up.

“Being ready for the next crisis is important, not only for economic reasons, but also for democratic ones,” said Strauss-Kahn. “Trust in institutions may be under threat if we have another crisis that looks like the previous one and the reaction is: ‘did you fix the problem?’”

Strauss-Kahn also said more work needs to be done on the risks posed by non-bank financial institutions, such as hedge funds and pension funds, and the interaction between the financial sector and the global economy, which may change part of the work of central banks.

“I don’t know if central bankers are happy to hear someone say you should extend the role you play, but I think that’s unavoidable.”




© International Monetary Fund


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