IIF welcomes super-fund plan by US lenders

Washington: The Institute of International Finance (IIF), a leading trade group of the world's biggest international banks, said yesterday that it supported the plan by top US banks to set up a super-fund to rescue institutions plagued by their exposure to mortgage backed securities.

"We welcome private initiatives aimed at restoring confidence in the markets and liquidity. However, much of the details of these funds are unknown and to that extent, it will be premature to make a judgement at this point," said Josef Ackermann, IIF chairman and CEO of Deutsche Bank at a press conference on the sidelines of the IMF-World Bank meetings.

The IIF yesterday announced the setting up of a committee to closely study the financial crisis and its future implications. "The system, in itself, is healthy. But we will have to go through a painful readjustment," he said, referring to the recent credit turmoil.

Review

The IIF announced a six-month review of banking practices in response to the crisis, including risk management, investment conduits, valuation, ratings and transparency. It also raised the possibility of some kind of global joint monitoring system with national regulators.

The $80-billion mortgage securities superfund, to be set up by Citigroup, JPMorgan Chase and Bank of America, is proposing to buy assets from troubled investment vehicles at higher than true market prices.