Address to Institute of International Bankers

• Pages: 74-76

Page 74

You have invited me to discuss international efforts to address the current difficulties confronting the global economy and financial markets. I will dwell on just one aspect: the private sector's role within the new financial architecture we are trying to put together. How can we create conditions for the private sector to benefit more from the opportunities of the globalized markets, while being a more efficient and responsible intermediary for channeling financial resources to their best use?

These conditions confront us with an imposing agenda, but not an idealistic dream. These are achievable objectives, provided we try to base the reforms on three straightforward principles: the universal promotion of free market mechanisms strengthened by a set of standards and principles of good conduct; a mature partnership between banking and financial institutions and their sovereign and corporate clients; and a cooperative approach to crisis management in the mutual interest of all market participants. Let me elaborate on these three objectives and how the IMF intends to contribute to their implementation.

Standards and Principles of Good Conduct

To optimize the opportunities and reduce the risks of globalization, we must head toward a world with open and integrated capital markets, achieved through a gradual process of liberalization supported by good macroeconomic policies and sound financial institutions. This is a world where financial institutions in the emerging markets-as elsewhere-will be better managed and more robust, as internationally accepted standards of regulation and supervision are implemented. Financial markets will be less prone to volatility, because participants will have more information, and they will be able to assess risk more realistically. This is a world where market participants and governments will operate according to higher standards of transparency and governance. And, of course, this is a world where the benefits of globalization will be more widely dispersed through efforts to ensure that no countries are marginalized and through social policies designed to make sure that people in each country have equitable access to education, health, a livelihood, and social protection in times of crisis. And last, but not least, this is a world that will rely primarily on the private sector to mobilize resources for investment and growth. All this implies that it will be a world where markets must be able to function efficiently, with risks being assessed realistically and the rewards of success and the cost of failure fairly distributed.

This set of objectives is straightforward. In spite of the nostalgia for state intervention of a few observers and, fortunately, even fewer policymakers, the immense majority of the world community wants to achieve these objectives through the active promotion of well conceived standards and principles of good conduct. After all, markets are about liberty and responsibility; they are about transparency, timely information, and equality of conditions for all players; and they are about enterprises' decisions, accountability, and profits-but also losses as a sanction against bad or ill-informed decisions. Of course, we know only too well that in international markets these conditions are unevenly fulfilled. Therefore, our aim must be to create, at world level, the well-functioning...