IMF head laments ‘loss of momentum’ in financial reform

“I am sometimes a bit worried about the loss of momentum” in the reform of the financial sector, in face of the “huge” task ahead, Strauss-Kahn told a conference.

Previously, “leaders were very committed to do something in the financial sector but as the crisis vanished, most of them are more concerned by domestic questions,” the head of the International Monetary Fund said.

“It would be unfair to say that the momentum has disappeared … nevertheless I don’t see the pressure as big and strong as it was a few months ago,” Strauss-Kahn added.

Governments in the United States and Europe have been scrambling to revamp and adapt banking rules since the collapse of US investment bank Lehman Brothers in September 2008 sparked a global credit crunch.

The IMF however has said that more direct measures than those proposed so far are needed, such as levies tied to risk presented by individual banks or limits to the size of their business.

Strauss-Kahn also said he was concerned about the consistency in priorities in financial reform across borders, citing different approaches in the United States and Italy as examples.

“Having an inconsistent system in the biggest economies … is of course creating new cause for regulatory arbitrage and the trigger for the next crisis.

“The countries having experienced some problems in the financial sector, namely the US and the European countries, are really keen to do something,” he said.

However, those countries that have not had major problems in the financial sector, like Canada and some emerging economies, tend to say that major reforms are not needed, he added. –AFP