Thursday, October 1, 1998 Published at 19:28 GMT 20:28 UK
Business: The Economy
Rubin calls for financial reform
US Treasury Secretary Robert Rubin wants change
US Treasury Secretary Robert Rubin has called for a radical reform of the world's financial system including an overhaul of the International Monetary Fund, whose handling of the currency turmoil has come under severe criticism.
Urgent solution needed
He said that there was an "urgent need to adapt and reform the international financial system" whose limits are being tested by the current global economic crisis.
Mr Rubin said that the failure of the high-risk hedge fund, Long-Term Capital Management, which rocked the financial world, was an "isolated" incident.
However he went on to say: "I think that there has been very substantial ill-discipline with respect to extension of credit, both in banks and other kinds of financial institutions. I think it's very common when markets get good and people get exuberant.
"I do believe there are essential questions about these very large bodies of money known as hedge funds, and whether there should be regulations with respect to transparency, possibly margins and other matters."
Growing economic problems
Mr Rubin's comments come in the wake of growing fears that the world wide recession could spread to Latin America, which in turn would have severe repercussions for US economic growth.
Mr Rubin said:"This crisis has presented unprecedented and enormously complex challenges to the international financial system created 50 years ago."
"Clearly the time has come to build a stronger system better suited for the challenges of the ever-changing modern global economy on the eve of the 21st century", he added.
The reform of the global financial system will be the main focus of attention at this weekend's meetings of the Group of Seven industrialised nations, and next week's annual meeting of the World Bank and International Monetary Fund.
Mr Rubin said that the global economic crisis cannot be resolved without intensified efforts at reform from all those involved - rich and poor countries and foreign investors.
He also called on Japan to "urgently implement strong effective measures" to boost domestic growth and clean up its troubled banking sector.
A report published next week from a working group of deputy finance officials will recommend increased openness by the IMF and by individual countries as a way to alert foreign investors to potential problems before they reach a crisis stage.
The report will also spell out proposals to boost the adequacy of banking supervision in developing countries and overall regulation of all financial institutions.
The Economy Contents