Business | Economy
Financial innovation needs supervision
The International Monetary and Finance Committee (IMFC) said financial innovation and securitisation, while having contributed to enhanced risk diversification and improved market efficiency, could go out of control without proper supervision.
- By Babu Das Augustine, Banking Editor
- Published: 23:04 October 21, 2007
- Crisis-plagued Rato fights to the end
- Global credit crisis 'proves need for IMF surveillance'
- Sub-Saharan Africa poised for healthy economic growth
- Fund struggles with finances
- World Bank drafts policy in the face of protests
- Bankers wary of investment rescue fund
- Global crises still pose threats to Russia - Kudrin
- Gulf states to decide monetary union
- Saudi not to review currency peg
- No agreement on sovereign funds
Washington: The International Monetary and Finance Committee (IMFC) said financial innovation and securitisation, while having contributed to enhanced risk diversification and improved market efficiency, could go out of control without proper supervision.
The IMFC, which comprises 24 finance ministers from major developed and developing countries, met against the backdrop of renewed volatility in markets, with Wall Street stocks tumbling again last week after a period of recovery.
The IMF earlier cautioned that market adjustment to the fallout from the meltdown in the US subprime mortgage market is likely to be uncertain and longer than expected.
The session, on the first day of the IMF-World Bank 2007 annual meetings, was chaired by Italian Economy and Finance Minister Tommaso Padoa-Schioppa, chosen last month to succeed Gordon Brown as head of the key committee.
At a post-meeting briefing, Padoa-Schioppa said while recent market turbulence had successfully been countered by timely and determined action by several central banks, it had also revealed a number of deeper problems.
"There are developments in the financial system which like genies moved out of the bottle are hard to follow," he said.
Related Links
"There is a clear need for supervisory bodies, and even for the very financial institutions which create these new instruments, to understand better what their creatures are doing out in the market. This is a reason for concern."
More from Economy
More from Business
Business Editor's choice
-
China breaks West's solar monopoly
Some countries in the world, especially Germany and the United States, have made considerable efforts to invest in developing solar energy cells
-
Burberry store spree will cut profit
Trenchcoat maker forges ahead with investment strategy targeting emerging markets
-
Laws needed to spur region bond markets
UAE Central Bank calls for creation of a centralised Sharia board to facilitate the sale of sukuk
