IMF head warns against halting bank reforms

The head of the International Monetary Fund on Wednesday said world leaders must not abandon financial sector reforms designed to prevent a repeat of the credit crisis that devastated economies.

IMF Managing Director Dominique Strauss-Kahn said it was crucial to usher in key changes, including better regulation and oversight of the banking sector.

“We need reform and we need political will,” he told the Asian Financial Forum in Hong Kong.

“There is still a lot to do… My concern is that in six to 12 months, everybody will be back to business as usual and will have forgotten the lessons of the financial crisis.”

Global economies were sent into a tailspin in late 2008 when credit dried up due largely to the knock-on effect of the collapse of the sub-prime — or high-risk — mortgage sector in the US.

Strauss-Kahn reasserted his dismissal of a so-called “double-dip” recession for the global economy, but said the pace of recovery has been sluggish and uneven with Asia bouncing back faster than the rest of the world.

He reiterated his call for China to boost the value of its currency, the yuan, as critics accuse Beijing of keeping the unit artificially low to boost exports.

Strauss-Kahn also played down fears about an asset bubble forming in China and the wider region, a growing worry as regional property prices surge.

But Asian countries should usher in temporary capital controls as a response to the massive amount of foreign money flowing into their economies, he added.

The region must also look at boosting domestic demand to cut its reliance on foreign consumers, especially in the hard-hit United States, Strauss-Kahn said.

Liu Mingkang, chairman of the China Banking Regulatory Commission, said Chinese policy makers are pushing hard to boost domestic consumption, especially in rural areas.

The Commission is also moving to control the explosive pace of lending among China’s banks, Liu said.

Source: AFP