CCTV.com - CNTV English - CCTV News


Homepage > News > Biz >

IMF draws lessons from financial crisis

07-21-2010 08:41 BJT

WASHINGTON, July 20 (Xinhua) -- Almost three years since the onset of the global financial crisis, the International Monetary Fund (IMF) gives its answer to what lessons central banks can draw from this catastrophe that has dragged many major economies into the worst recession in decades.

"The crisis brought the financial system to the verge of systemic collapse and raised the prospect of depression and deflation. Central banks helped defuse these threats, including through exceptional measures," the IMF said in a report released on Tuesday.

The crisis, triggered by a liquidity shortfall in the U.S. banking system, has resulted in the collapse of large financial institutions, the bailout of banks by governments and downturns in stock markets around the world. It is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s.

Central banks from most major economies have done a great deal to fight the crisis by adopting both conventional and unconventional measures. Taking the U.S. for example, the Federal Reserve, the country's central bank, cut the leading interest rate to a historical low level and designed unprecedented facilities to inject liquidity to the financial system and soothe the credit crunch.

The report, titled Central Banking Lessons from the Crisis, said that the crisis seems to provide three important lessons for policy frameworks.

First, the IMF believed that financial stability should be addressed mainly using macroprudential policies, which seek to ensure financial stability by mitigating the build-up of systemic risk.

Macroprudential tools include capital requirements and buffers, forward-looking loss provisioning, liquidity ratios, and prudent collateral valuation.

"All potentially systemic institutions and markets should be within the macroprudential regulatory perimeter. Central banks should play a key role, whether or not they serve as the main regulator," said the report.

Second, the IMF insisted that price stability should remain the primary objective of monetary policy.

"Central banks have maintained the price stability credibility they gained before the crisis and this public good must be preserved," it noted. "The monitoring and analysis of financial system developments and risks can be better integrated into the formulation and implementation of monetary policy."

Third, the agency believed that it is necessary for central banks to make changes to their liquidity operations and broad crisis management frameworks, including to address moral hazard.

"Changes to enhance the flexibility of central bank operational frameworks will improve the resilience of the system. Institutions and markets that are potential recipients of liquidity support in times of stress should be monitored and regulated," said the report.

Editor:Xiong Qu |Source: Xinhua

Hot Videos view more

The celebrations are still continuing as the victorious coach, Joachim Loew, has been honored for his achievement in his hometown of Freiburg.
Germany coach Loew honored in hometown of Freiburg

Chinese men´s national team continued its preparations for next year´s Asian Cup, as they managed a one-all draw against visitors Jordan during a football friendly in Harbin, the capital city of Northeast China´s Heilongjiang Province.
China held to 1-1 draw by Jordan

The defending world champs came into the contest with a perfect 6-and-oh record, but they would be in for a tough first half before opening things up in the second.
USA beat Slovenia 119-76 in quarter-finals

Hot Stories more

UK authorities believe killer of James Foley is a British national

Across the UK the hunt is on for James Foley’s killer, who authorities believe is a British national. As Richard Bestic reports from London, Prime Minister David Cameron cut short his summer break to lead his government’s response.

Israeli war jets renews Gaza strike as truce talks stalled

Three Palestinians were killed and 40 others wounded in the intensive Israeli war jets´ airstrikes on the Gaza city on Tuesday night, shortly before an end of a 24-hour ceasefire in the Gaza Strip,

Missouri police arrest dozens after violent night

As the protests in the town of Ferguson, Missouri turned violent with police facing ´heavy gunfire´ from some ´criminal elements´, cops fired tear gas, stun grenades and arrested 31 demonstrators on Monday night.

Picture in news more

More Video News

Choose TV Program