Banks Eye Early Crisis Intervention
WASHINGTON (AP) _ Private banks and investors in countries hit by economic turmoil need to intercede sooner to help governments and international lenders solve the problems, a group representing the world’s largest banks said Monday.
Charles Dallara, head of the Institute of International Finance, said while cooperation is increasing among finance ministers and other officials, nothing is being done to involve the private sector in areas such as debt restructuring.
``No one has taken the notion of dialogue forward in a meaningful way,″ Dallara said. ``I hope they will, because it could be one of the keys″ to strengthening the global financial system.
Dallara released recommendations his institute will make to the Washington meetings this month of the International Monetary Fund and the World Bank. The institute represents 315 private banks and financial institutions that invested $150 billion last year outside developed countries and will invest $200 billion this year.
In light of recurring economic crises, which started in Mexico in the mid-1990s, then spread to Asia and Latin America, Dallara said a more resilient global financial system is needed.
``The far-reaching changes over the past decade call for a basic rethinking of how market participants and public officials can effectively work together to overcome emerging-market crises,″ Dallara said.
He welcomed a proposal by Treasury Secretary Lawrence Summers for the IMF to establish a market conditions advisory group that would involve the private sector.
Governments in emerging market countries, encouraged by the IMF, should make substantial efforts to talk more regularly with private investors about their economic situations, Dallara said.
Mexico, South Korea and Argentina have started programs to keep investors informed, he said, but ``their efforts have received scant attention, a situation I hope will change.″
Dallara also said emerging-market countries also have to improve the quality of financial information they provide. At the same time, he said, the IMF must ensure rigorous standards are applied to make certain governments adequately disclose external debt.
In preparation for its mid-April meeting, the IMF released a report saying the 15-month-old European Union currency, the euro, is undervalued by at least 30 percent against the U.S. dollar because financial markets have oversold it.
Jacques Artus, a senior IMF official who monitors European economies, said ``the weakness is really quite unjustified″ and could harm the economies if it persists.
He attributed the slump in part to the surprising strength of the U.S. economy, which he said is ``pulling foreign investments out of the euro-area and into the United States.″ Eleven EU countries introduced the euro Jan. 1, 1999.
Artus said the IMF has advised the European Central Bank not to raise interest rates to shore up the euro, because financial markets might interpret that as a sign that economic growth in Europe may falter.
On the Net: Institute of International Finance: http://www.iif.com
International Monetary Fund: http://www.imf.org