2nd UPDATE: Lipsky: IMF Studying New Measures To Support Members
(Updates with comments and background on foreign reserves)
By Ken Parks
Of DOW JONES NEWSWIRES
MEXICO CITY -(Dow Jones)- The International Monetary Fund is studying new
measures to support member countries following the success of its flexible
credit line launched earlier this year, a top IMF official said Monday.
"We are exploring the possibility of improving our existing facilities or
adding other insurance-like facilities that will give our members greater
confidence that they don't need to self-insure by building up [foreign]
reserves," IMF Deputy Managing Director John Lipsky said during a conference in
Mexico City.
Developing countries like China have accumulated massive levels of foreign
exchange reserves in recent years, which, among other things, serve as a kind of
insurance against financial instability. Those reserves have also been blamed
for contributing to the overabundance of liquidity in the global financial
system prior to the crisis.
The improvements to the IMF's existing support facilities would include the
flexible credit line program, he said.
The flexible credit line program, relaunched in March with a higher funding
level and longer repayment period than a previous version in 2008, was designed
to help countries with sound macroeconomic and fiscal policies weather the
global crisis.
The program comes without the strict fiscal conditions normally associated
with IMF loans. So far, Poland, Mexico and Colombia have received flexible
credit lines.
Lipsky said the global crisis hasn't derailed support in the leading emerging
market economies for growth based on open economies and financial-sector
development.
Emerging markets managed to avoid the worst effects of the crisis because
their financial systems had less international exposure than those of developed
economies, he added.
"However, there is no guarantee this will be the case in the future when new
strains might arise from other sources, perhaps domestic ones," said Lipsky, who
urged further development of financial systems in emerging economies.
Commenting on the current debate about global financial system regulatory
reform, the official said regulation should include all systemically important
institutions and a mechanism for winding down large financial institutions
operating in different jurisdictions to reduce the risk of future financial
crises.
Lipsky warned that the size of a financial institution alone doesn't
necessarily create a systemic risk.
"There is no clear guide to the optimal size of bank and non-bank financial
intermediaries," he said.
-By Ken Parks, Dow Jones Newswires; 52-55-5001-5723; ken.parks@dowjones.com
(END) Dow Jones Newswires
10-19-092057ET
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