PBOC calls for global financial co-operation

PUBLISHED : Friday, 27 March, 2009, 12:00am
UPDATED : Friday, 27 March, 2009, 12:00am

The world's financial supervisors needed to work together to overhaul the international financial system, starting with 'self-criticism', the research arm of the mainland's central bank said yesterday.

In an article on its website, the People's Bank of China proposed several revamps and innovations, including drawing 'counter-cyclical multipliers from various prosperity indices' to serve as an early warning of market chaos.

The PBOC blamed the hands-off attitude and complacency of regulators, namely those in Washington, for causing the crisis, calling for better co-operation among financial supervising bodies around the world and tightening oversight on credit rating services.

'[But] we should start from the very basics: the self-criticism,' the article said.

The article was the latest in a series published by the PBOC addressing a range of issues expected to come under hot debate at the Group of 20 summit next Thursday.

Central bank governor Zhou Xiaochuan raised some eyebrows on Tuesday by proposing a single global reserve currency to displace the US dollar, followed by a defence of the country's savings glut, which some observers in the West have blamed as partly responsible for the global crisis.

In yesterday's article, the PBOC highlighted the alleged failure of financial managers and regulators to maintain a stable financial market.

'The pro-cyclical nature of many existing indices, serving both as indicators of the economy and a motivating force behind investor decisions, has amplified volatilities,' said the statement. 'Authorities responsible for overall financial stability need to develop counter-cyclical multipliers.'

It also fired back at criticism that China had manipulated its currency.

'International organisations always focus on the macroeconomic monitoring of emerging economies, especially the exchange rate issue, but their performance in supervising capital flows is not satisfactory,' the statement added.