West urges financial overhaul, Asia fears slowdown
By admin at 17 October, 2008, 3:05 am
Asian policymakers held emergency talks to find ways to bolster their banks on Friday before a meeting between U.S. and French presidents that Nicolas Sarkozy said could help launch a “refoundation of capitalism.”
Regulators demanded tougher financial rules, to guard against a repeat of the worst financial crisis in 80 years, with the chairman of Britain’s financial watchdog saying it was time “to wipe the slate clean.”
Adair Turner, chairman of British Financial Services Authority, said the global banking system was past the danger of systemic meltdown although the world faced recession.
“There’s no chance of a 1929-1933 depression. We know the lessons, and we know how to stop it happening again,” he told the Guardian newspaper.
French president Sarkozy said a meeting with President George W. Bush on Saturday would help lay the groundwork for a global summit that should make early decisions on transparency, global standards of regulation, cross-border supervision and an early warning system.
But White House spokeswoman Dana Perino said the meeting between Bush, Sarkozy and European Commission President Jose Manuel Barroso was not connected to the global summit.
British Prime Minister Gordon Brown said the three would discuss “urgent reforms of the international financial system.”
“There are no Britain-only or Europe-only or America-only solutions to today’s problems. We are all in this together, and we can only resolve this crisis together,” Brown wrote in the Washington Post newspaper.
European shares opened higher, buoyed by investors picking up low-priced bank shares and following gains in the United States and Asia. At 0750 GMT, the FTSEurofirst 300 index of top European shares was up 3.7 percent.
ASIAN ACTION
Asian governments scrambled to find ways to shore up their banks and try to combat an economic slowdown.
Reflecting growing alarm over the widening credit crisis, a panel of Japan’s ruling Liberal Democratic Party was considering schemes to recapitalize big banks with government money, Kyodo news agency reported.
In Korea, top finance officials held emergency talks to discuss ways to boost confidence in its banks after the won suffered its biggest single-day decline against the U.S. dollar in 11 years on Thursday.
Australia’s prime minister held a summit with industry leaders who gave a grim assessment of business conditions. They said credit was drying up and smaller firms were collapsing despite government assurances the economy was in good shape.
Singapore, one of Asia’s richest economies, and Malaysia both said they would guarantee all bank deposits until 2010, following similar moves by other governments.
After world governments pledged $3.2 trillion to stabilize the financial sector, money markets have shown tentative signs of healing, though interbank lending is still tentative at best.
Short-term U.S. dollar rates fell for the fourth day on Asian money markets but while the cost of borrowing dollars for a day eased further to near the Federal Reserve’s target, longer term rates remained high showing banks fear lending to each other for anything but the shortest periods of time.
Overnight deposits at the European Central Bank eased back slightly from their record high but remained above 200 billion euros for the second day running — more evidence that banks prefer to house cash with central banks rather than their commercial counterparts.
RECESSION
The world’s richest nations are in or close to recession and Bank of Japan Governor Masaaki Shirakawa said there was growing uncertainty over the bank’s view that the economy would return to moderate growth.
“We must be mindful of how recent global financial market turmoil could, through worsening world economic conditions, affect Japan’s economy,” he said.
European Central Bank policymaker Guy Quaden said the euro zone’s economic prospects had deteriorated over the last week amid the latest leg of the financial crisis,
Signs of trouble in China increased uncertainties about the world’s main source of growth.
Listed Chinese firms put more than $1 billion of fund-raising plans on ice as the global credit crisis and falling share prices begin to cast a chill over China’s fast-growing economy.
And hundreds of workers gathered outside a shuttered toy factory in southern China, after a Hong Kong-listed toymaker closed as tough times were made worse by U.S. economic weakness.
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