Focus on Fixing Financial System, Avoiding Next Crisis

World central bankers meet in Asia to debate next steps to build stronger system

China hosts IMF-sponsored conference on macro-prudential policy

Need for broader financial sector reform underlined

Calling for continued global cooperation, Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF) said Asia was leading the world recovery after the recession, but fixing the fragilities of the international financial system remained a top priority.

How to prevent another systemic breakdown—when financial sector problems can spread rapidly and infect the real economy and jobs—was the topic of a high-level conference in Shanghai on October 18. Senior central bank officials from Asia, Europe, North and South America, and Africa came together in Shanghai to debate the issue.

The conference on “Macro-Prudential Policies: Asian Perspectives” was sponsored by the IMF and hosted by the People’s Bank of China (PBC). Lead speakers included the Governor of the People’s Bank of China, Zhou Xiaochuan, IMF Managing Director Strauss-Kahn, IMF First Deputy Managing Director John Lipsky, and PBC Deputy Governor Yi Gang.

Participants from about 25 countries attended the closed-door meeting, and included central bank governors and deputy governors, along with other senior policymakers and regulators.

Importance of policy coordination

The Shanghai conference served to underscore the importance of dialogue and policy coordination linking the advanced economies, emerging market economies, and developing economies. “The great challenges of today all require a cooperative solution—especially if we are to achieve strong, sustainable, and balanced global growth in the years ahead,” said Strauss-Kahn in his keynote address.

Speaking at a closing press conference, PBC Deputy Governor Yi Gang said the conference had reached an “important consensus” on international cooperation in ensuring strong macro-prudential policies, because systemic risks “are very likely to spread over borders.” He also pointed to consensus on the need to have clear lines of responsibility in addressing macro-prudential issues--especially in the area of information gathering—and the need to foster close cooperation between central banks and other national regulators.

One key purpose of the Shanghai conference was to integrate the lessons learned from the financial turmoil of the global crisis. “This is directly related to today’s conference, which has reflected...