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Call for new global currencies deal â€Ž

05 October 2010 15:11 (UTC +04:00)

Baku - APA-Economics. The worldâ€™s leading countries should agree a new currency pact to help rebalance the global economy, a leading association of financial institutions has urged, Financial Times reported.

The Institute of International Finance, which represents more than 420 of the worldâ€™s leading banks and finance houses, warned on Monday that a lack of such co-ordinated rebalancing could lead to more protectionism. Charles Dallara, IIF managing director, said: â€œA core group of the worldâ€™s leading economies need to come together and hammer out an understanding.â€

Mr Dallara, who as a US official worked on the 1985 Plaza Accord which co-ordinated international action to strengthen the yen against the dollar, called for a more sophisticated updated version of such an agreement. This should include stronger commitments to medium-term fiscal stringency in the US and structural reform in Europe. â€œExchange rate understandings are of little use on their own,â€ he said.

The institute also released its latest forecasts for net flows of capital to emerging markets, which showed a sharp upwards revision for 2010, with the previous estimate of $709bn rising to $825bn. The institute said that ultra-low monetary policy in rich countries was rapidly driving money into emerging markets in search of yield, risking destabilisation. â€œThere is an environment of unilateralism and bilateralism, laced with contributions of isolationism and parochialism,â€ Mr Dallara said.

Releasing its policy statement and forecast ahead of this weekendâ€™s annual meetings of ministers at the International Monetary Fund and World Bank in Washington, the IIF also urged international policymakers not to â€œgold plateâ€ the Basel III capital accords. It advised countries to avoid creating a variety of national regulations on capital and competing â€œresolutionâ€ regimes.

Mr Dallara criticised the US for failing to adopt a more multilateral approach when it passed financial regulation reform earlier this year. â€œThere was very little attempt by the US authorities to co-ordinate provisions globally,â€ he said.