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25 November 2009

IMF Strauss-Kahn: Take-Off or Holding Pattern? - To sustain global growth, world economy will need a new engine


Strauss-Kahn warned that even if financial conditions have improved, they are still far from being normal. As regards exit strategies, economies should wait until financial stability is completely recovered.

At the Confederation of British Industry’s Annual Conference, Dominique Strauss-Kahn warned that even if financial conditions have improved they are still far from being normal. As regards exit strategies, he remarked that economies should wait until financial stability is completely recovered.

Strauss-Kahn presented the financial sector regulation challenges to be addressed from the IMF point of view.

Regulators and supervisors should pay more attention to systemically important institutions and to their cross-border interactions. This calls for heightened policy coordination.

 

In addition to better rules, better application of rules is also needed—and that means beefing up supervision and supervisory capacity. The new regulatory system must do a better job of avoiding capture and complacency. This is another lesson from the crisis. We also need to address risk management in the financial sector and break the link between risky behaviour and compensation.

 

The IMF has asked the G20 to look into financial sector taxes. There are a number of ways to think about this, and the IMF will look at it from various angles and consider all the proposals. He also questioned whether or not the tax system could help reduce excessive risk-taking in the financial sector.

 

He concluded by saying “that the global economy has made remarkable progress over the past year, but as we stand on the cusp of recovery, new and complex challenges are already popping up. How do we deal with these challenges? In my view, there is really only one fundamental answer—to persevere with the spirit of cooperation that has brought us to this point.”

 

Full speech

 



© International Monetary Fund


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