ID :
30240
Fri, 11/14/2008 - 17:11
Auther :
Shortlink :
http://m.oananews.org//node/30240
The shortlink copeid
Prudential regulatory standards can prevent global crisis: FM
On Board PM's Special Aircraft, Nov 14 (PTI) India will pitch for a common prudential and regulatory standards for all financial institutions in the world and a convergence of accounting standards to prevent collapse of global financial institutions at the summit of world leaders on global economic and financial crisis in Washington Saturday.
Prime Minister Manmohan Singh will articulate India's views at the summit called by U.S. President George W. Bush which will also be attended by leaders of developed countries like France, Germany, Britain and Japan and those from the developing world like China and Brazil.
Finance Minister P. Chidambaram told reporters on board the Prime Minister's special aircraft India feels there was a need for the world to move towards a new order of global investment which is possible only by greater inclusivity in the international financial system.
"In many ways the International Monetary Fund (I.M.F.) has been unable to be an early warning system. The G-7 is too narrow and too small. An inclusive system which can serve as a global oversight and serve as an early warning system is needed," he said.
Asked if he was talking about a global regulator, Chidambaram said regulation in the present context was a function that national regulators would be loathe to give up.
"That is why regulation must be national. If we can agree
upon a common prudential and regulatory standards and then ask
national regulators to apply those standards, there can be
some kind of a global oversight, where the national regulators
are doing their job."
"I don't think regulation could be raised to a global
level. That will be too ambitious and perhaps not not possible
in today's context," he said adding there must be some ways by
which countries would have a global oversight with commonly
accepted regulatory and prudential standards overseen by
national regulators.
"These are things that are to be talked to. These are
formative ideas."
Chidambaram said in retrospect it is clear that if there
had been effective surveillance mechanism, it could have
identified the huge risks that had been taken by some
international financial institutions. In the absence of such
a surveillance or oversight mechanism these financial
institutions, some of which collapsed, took unacceptable risks
that caused a crisis in the U.S., which is the epicentre of
the global meltdown.
"So what we talked about in Sao Paulo (in Brazil at the
meeting of the G-20 Finance Ministers) or what we will talk
about in Washington and can agree upon is such a global
oversight mechanism. I don't know what shape it will take.
But we need to talk about it," he said.
Asked if it will be global standards and local
regulation, the finance minister said "that is what I think
will happen".
Referring to Prime Minister's departure statement, he
said there were three points which he had dealt with -- first
the need for greater inclusivity in the international
financial systems and second the need to ensure that the
growth prospects of the developing countries do not not
suffer.
And third, avoid protectionist tendencies. "The key point
is we must move towards a new order of global investment. This
can become possible only by greater inclusivity in the
international financial system."
He said while the world grapples with the economic
crisis, the countries most affected by it find their growth
prospects hampered. We must not not forget that there are only
a handful of economies that are driving the world's economic
growth.
Among them are China and India and a few other countries.
Some others have the ability to become drivers of growth, but
they are also affected by the economic crisis.
"It is very important that the few countries that can
drive economic growth and other countries which have got on to
the bandwagon of development should not suffer. These
countries should not not be made to suffer. More resources
must be made available to these countries, including India, so
that they continue to grow and drive others' development.
"The crisis should not not be an excuse to go into
protectionist cocoon. That will be the worst way to resolve
the crisis. We must try to encourage free flow of goods and
services and we must continue to enhance the flow of capital."
Excepting for increasing the free flow of goods, services
and capital there is no no way in which the world will recover
and get back to the growth path.
"So, that is the Prime Minister emphasises that this is
not the time to adopt protectionist policies. This would
require deep thought and deliberation and quick agreement
among the leaders."
He said nations should agree to locate resources and
agree upon the channels through which this resource would be
made available and diverted to the developing countries.
These could be existing multinational institutions or we
could devise an ad-hoc fund dispersing mechanism and finally
the international institution, which constitute the global
financial architecture, must be reformed.
"And this goes beyond the IMF and the World Bank. This
includes the Bank for International Settlements (B.I.S.) and
the Forum for Financial Stability (F.I.S.). So I think the
three points the prime minister made in his departure
statement make the three pillars around which we have to make
suggestions, list to others' suggestions and agree upon them,"
he said.
Asked if India was talking of a new mechanism for fund
flows, Chidambaram said it depended upon where the resources
would be found. If the resources could be found and
channelised through the existing multinational institutions
that would be good.
Else, we have to find another mechanism through which
these resources can be channelised to the developing
countries, he added.
Asked if China and others could be asked to move their
reserves from the U.S. to developing nations, he replied that
he did not not know where China kept its reserves.
"I don't even know where India keeps its reserve. It's a
closely guarded secret. It's for the countries to decide where
their reserve should be kept. We cannot tell another country
how to handle its reserves."
To a question on increased contribution to I.M.F. by
India, he said if it was in terms of contribution to
additional capital for these institutions then surely India
would accept its share of responsibility.
"But is that the way that has been suggested. I don't
know. But if additional capital is infused consistent with our
share, voting share, we will accept our share of
responsibility."
About reforms of I.M.F., Chidambaram said I.M.F. has just
done one set of reforms under which India got a higher voting
right.
"Whether IMF is ready for another major reform of the
voting rights, I don't know. I doubt it. But surely, I.M.F.
must begin to discuss within itself governance reform."
Asked what kind of prudential norms India was looking at,
he said these are well-known norms to regulate financial
institutions -- capital adequacy, risk-assessment, risk base.
What all bankers do and what all the Bank for International
Settlement is supposed to be doing.
To a question whether another Brettonwoods institution
was in the making at the time of the summit, Chidambaram said
it was very difficult to say whether they could invent another
Brettonwoods institution.
"What we are trying to do is to improve global governance
and global oversight of these financial institutions. I don't
expect that we will have another Brettonwoods type of
institution. That's my view."
On discussions involving a lameduck administration in the
U.S. and a government due to face elections in India, he said
the resolution of this crisis would take countries to a point
of time well beyond January, 20 (when Obama takes over) and
beyond May 22 (by when a new government will be in place in
India).
"So I don't think we are going to take an election-
constricted point of view. We have to take a medium to long
term point of view and I believe the U.S. also will take view.
After all, President Bush and President-elect Obama are
reported to have talked about these issues at great lengths
only two days ago," he said.
"So I think Obama inputs will be there in whatever
President Bush presents. So we will have to take a view that
takes us well beyond those election dates. That is the stance
that I think India will adopt."
Replying to a query whether non-attendance of Obama in
the Washington summit would be a dampener, he said "that's for
Obama to decide. I think he made a politically very correct
statement when he said that the U.S. has only one President at
any given time.
About resources from I.M.F. and World Bank, the finance
minister said India did not need an I.M.F. programme but money
through the World Bank for development.
"And if you ask me to pick up an institution that I would
say that if World Bank can give us more then we will happily
accept that for our programmes and projects. Our requirement
is for project-oriented and programme-oriented funds."
World Bank was now giving funds to the order of about USD
three billion and that can be raised. It can finance more
projects which have been pushed to next year and thereafter.
We would be happy if World Bank was to raise its development
assistance. PTI
Prime Minister Manmohan Singh will articulate India's views at the summit called by U.S. President George W. Bush which will also be attended by leaders of developed countries like France, Germany, Britain and Japan and those from the developing world like China and Brazil.
Finance Minister P. Chidambaram told reporters on board the Prime Minister's special aircraft India feels there was a need for the world to move towards a new order of global investment which is possible only by greater inclusivity in the international financial system.
"In many ways the International Monetary Fund (I.M.F.) has been unable to be an early warning system. The G-7 is too narrow and too small. An inclusive system which can serve as a global oversight and serve as an early warning system is needed," he said.
Asked if he was talking about a global regulator, Chidambaram said regulation in the present context was a function that national regulators would be loathe to give up.
"That is why regulation must be national. If we can agree
upon a common prudential and regulatory standards and then ask
national regulators to apply those standards, there can be
some kind of a global oversight, where the national regulators
are doing their job."
"I don't think regulation could be raised to a global
level. That will be too ambitious and perhaps not not possible
in today's context," he said adding there must be some ways by
which countries would have a global oversight with commonly
accepted regulatory and prudential standards overseen by
national regulators.
"These are things that are to be talked to. These are
formative ideas."
Chidambaram said in retrospect it is clear that if there
had been effective surveillance mechanism, it could have
identified the huge risks that had been taken by some
international financial institutions. In the absence of such
a surveillance or oversight mechanism these financial
institutions, some of which collapsed, took unacceptable risks
that caused a crisis in the U.S., which is the epicentre of
the global meltdown.
"So what we talked about in Sao Paulo (in Brazil at the
meeting of the G-20 Finance Ministers) or what we will talk
about in Washington and can agree upon is such a global
oversight mechanism. I don't know what shape it will take.
But we need to talk about it," he said.
Asked if it will be global standards and local
regulation, the finance minister said "that is what I think
will happen".
Referring to Prime Minister's departure statement, he
said there were three points which he had dealt with -- first
the need for greater inclusivity in the international
financial systems and second the need to ensure that the
growth prospects of the developing countries do not not
suffer.
And third, avoid protectionist tendencies. "The key point
is we must move towards a new order of global investment. This
can become possible only by greater inclusivity in the
international financial system."
He said while the world grapples with the economic
crisis, the countries most affected by it find their growth
prospects hampered. We must not not forget that there are only
a handful of economies that are driving the world's economic
growth.
Among them are China and India and a few other countries.
Some others have the ability to become drivers of growth, but
they are also affected by the economic crisis.
"It is very important that the few countries that can
drive economic growth and other countries which have got on to
the bandwagon of development should not suffer. These
countries should not not be made to suffer. More resources
must be made available to these countries, including India, so
that they continue to grow and drive others' development.
"The crisis should not not be an excuse to go into
protectionist cocoon. That will be the worst way to resolve
the crisis. We must try to encourage free flow of goods and
services and we must continue to enhance the flow of capital."
Excepting for increasing the free flow of goods, services
and capital there is no no way in which the world will recover
and get back to the growth path.
"So, that is the Prime Minister emphasises that this is
not the time to adopt protectionist policies. This would
require deep thought and deliberation and quick agreement
among the leaders."
He said nations should agree to locate resources and
agree upon the channels through which this resource would be
made available and diverted to the developing countries.
These could be existing multinational institutions or we
could devise an ad-hoc fund dispersing mechanism and finally
the international institution, which constitute the global
financial architecture, must be reformed.
"And this goes beyond the IMF and the World Bank. This
includes the Bank for International Settlements (B.I.S.) and
the Forum for Financial Stability (F.I.S.). So I think the
three points the prime minister made in his departure
statement make the three pillars around which we have to make
suggestions, list to others' suggestions and agree upon them,"
he said.
Asked if India was talking of a new mechanism for fund
flows, Chidambaram said it depended upon where the resources
would be found. If the resources could be found and
channelised through the existing multinational institutions
that would be good.
Else, we have to find another mechanism through which
these resources can be channelised to the developing
countries, he added.
Asked if China and others could be asked to move their
reserves from the U.S. to developing nations, he replied that
he did not not know where China kept its reserves.
"I don't even know where India keeps its reserve. It's a
closely guarded secret. It's for the countries to decide where
their reserve should be kept. We cannot tell another country
how to handle its reserves."
To a question on increased contribution to I.M.F. by
India, he said if it was in terms of contribution to
additional capital for these institutions then surely India
would accept its share of responsibility.
"But is that the way that has been suggested. I don't
know. But if additional capital is infused consistent with our
share, voting share, we will accept our share of
responsibility."
About reforms of I.M.F., Chidambaram said I.M.F. has just
done one set of reforms under which India got a higher voting
right.
"Whether IMF is ready for another major reform of the
voting rights, I don't know. I doubt it. But surely, I.M.F.
must begin to discuss within itself governance reform."
Asked what kind of prudential norms India was looking at,
he said these are well-known norms to regulate financial
institutions -- capital adequacy, risk-assessment, risk base.
What all bankers do and what all the Bank for International
Settlement is supposed to be doing.
To a question whether another Brettonwoods institution
was in the making at the time of the summit, Chidambaram said
it was very difficult to say whether they could invent another
Brettonwoods institution.
"What we are trying to do is to improve global governance
and global oversight of these financial institutions. I don't
expect that we will have another Brettonwoods type of
institution. That's my view."
On discussions involving a lameduck administration in the
U.S. and a government due to face elections in India, he said
the resolution of this crisis would take countries to a point
of time well beyond January, 20 (when Obama takes over) and
beyond May 22 (by when a new government will be in place in
India).
"So I don't think we are going to take an election-
constricted point of view. We have to take a medium to long
term point of view and I believe the U.S. also will take view.
After all, President Bush and President-elect Obama are
reported to have talked about these issues at great lengths
only two days ago," he said.
"So I think Obama inputs will be there in whatever
President Bush presents. So we will have to take a view that
takes us well beyond those election dates. That is the stance
that I think India will adopt."
Replying to a query whether non-attendance of Obama in
the Washington summit would be a dampener, he said "that's for
Obama to decide. I think he made a politically very correct
statement when he said that the U.S. has only one President at
any given time.
About resources from I.M.F. and World Bank, the finance
minister said India did not need an I.M.F. programme but money
through the World Bank for development.
"And if you ask me to pick up an institution that I would
say that if World Bank can give us more then we will happily
accept that for our programmes and projects. Our requirement
is for project-oriented and programme-oriented funds."
World Bank was now giving funds to the order of about USD
three billion and that can be raised. It can finance more
projects which have been pushed to next year and thereafter.
We would be happy if World Bank was to raise its development
assistance. PTI
