October 3 2010IMF warns of lack of regulation against another crisis
Governments are still well short of creating a regulatory system that could prevent another major financial crisis, according to the International Monetary Fund.
A report by fund staff published ahead of this week’s annual meetings of the IMF and the World Bank said that while talks over the “Basel III” banking capital standards had made progress, large parts of the financial system had yet to be dealt with.
Policies need to address not only the risks posed by individual banks but also importantly those posed by non-banks and the system as a whole,” the report said. “The recent proposals of the Basel Committee on Banking Supervision represent a substantial improvement in the quality and quantity of bank capital, but these apply only to a subset of the financial system.”
Since the IMF stirred up the debate earlier this year by proposing that governments levy a fee from financial institutions to pay for the cost of future rescues, the idea has struggled to make headway. Even in the US, where the White House threw its weight behind such a plan, such a tax failed to make it into the Dodd-Frank financial regulatory reform bill passed this summer, and Republicans have promised to keep fighting against the idea.
Meanwhile, other countries such as Canada and Japan, whose banks did not suffer greatly during the financial crisis, rejected the idea as irrelevant.
José Viñals, director of the monetary and capital markets department of the IMF, denied that the bank tax idea had failed, saying that governments wanting to set up “resolution funds” to pay for an orderly wind-up of a collapsed bank should bear it in mind. “It is still part of the menu of options that can be considered to deal with systemically important financial institutions,” he told reporters.
Mr Vinals said that the lack of a cross-border regime for different national regulators to cope with the collapse of a multinational institution needed particular attention. “We have proposed a pragmatic approach with agreement between different financial centres” rather than a global regulatory regime, he said.
