IIF William Rhodes at World Economic Forum: warning to regulators time is running out
27 January 2010
He believes, among other things, that the Financial Stability Board should exercise leadership in collaboration with the two accounting standards boards to secure a renewed commitment to convergence. Consistency on a global basis is needed.
Saying that unilateral actions by countries, such as the UK supertax and the US bank levy, would damage the financial system, Bill Rhodes, Vice-Chairman of Citigroup and Vice-Chairman of the IFF, which represents the world’s largest international banks, called on governments to live up to promises made at the G20 summit in Pittsburgh to co-ordinate regulation along the lines of agreed international rules on capital, liquidity, accounting standards and pay.
He highlighted four critical issues that the G20 needs to deal with on an urgent basis. Key to this, however, is action now by the IMF and the WTO, in particular, to work to create the essential framework for stability and growth. This requires:
1. Rolling back current protectionist measures in both trade and finance, preventing new restrictions on trade, setting a firm date for the Doha Round conclusion, and enhancing cross-border regulatory and supervisory coordination and agreement on financial reforms.
It is important to underscore the seriousness of the financial fragmentation issue. The system that has evolved over the last generation is a globalized one, involving deep inter-connectiveness of institutions and markets across national borders. Actions by governments to take unilateral measures to ringfence deposits, or to impose special taxes, or initiate regulatory reforms that are not consistent with the thrust of international measures, will damage the financial system. The G20 has stated in its summit declarations an acute awareness of this risk, yet almost every day now we are seeing policy decisions and announcements that are not being coordinated and that have the potential of doing systemic damage.
2. need to see clear articulation by governments - especially those of the mature economies - of their medium-term fiscal correction strategies;
3. And, at the same time, we need to see credible exit strategies from central banks to unwind the massive liquidity created during the crisis.
4. In addition, we dare not risk complacency on the issue of imbalances. It is long overdue that the IMF, strongly supported by the G20, formulates an agenda for action on current account imbalances between the major deficit and surplus economies to prevent a recurrence of large new imbalances.
He concluded saying that “The Financial Stability Board should exercise leadership in collaboration with the two accounting standards boards to secure a renewed commitment to convergence. We need consistency on a global basis in accounting and regulatory standards to advance progress towards greater stability of the international financial system.”
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