GLOBAL - The director-general of the Banca d'Italia Fabrizio Saccomanni has called for the International Monetary Fund (IMF) to become a global monetary and financial watchdog.
In addition, he said it should play a part in the surveillance of macroeconomic policies and their interaction, as well as monitoring key commodities prices, such as oil, and currency fluctuations.
Recognising the difficulty involved in apportioning "so much power" to the IMF, he said the organisation should be more vocal on the actions needed to solve the crisis, as well as flagging up destabilising trends before they produce market turmoil.
Saccomanni urged stakeholders to build on the work of the Financial Stability Forum (FSF). Quoting Mario Draghi, FSF's chairman and governor of the Banca d'Italia, he said the future financial system should have more capital, less debt and more efficient regulations.
While acknowledging it was a very controversial subject, he called for efforts to bring together monetary policy and supervisory action. Some academic work, he said, was starting to highlight a role for monetary policy in preventing "bubbles".
In particular, he said, more attention should be paid to the growth of credit flows, as they could be an early warning of inflationary pressures and financial instability.
Against a backdrop of responses to the crisis which Saccomanni described as "generally inadequate", he said: "The idea to concentrate only on price stability and ignore the inflation coming from asset price bubbles is shortsighted."
Further, he continued, the progress made in recent years to create a more articulated international financial infrastructure to manage recurrent crisis had not yet led to global coordination of supervision and action.
Referring to the Eurozone, he said the European Central Bank (ECB) had acted with unprecedented measures, such as pumping liquidity back into the system and the acceptance of lending collateral below normal standards.
However, recalling the content of the Maastricht Treaty, he said: "In Europe, as well, we failed to agree on coordination of supervisory activity."
Speaking at the same event, Marco Annunziata, chief economist at Unicredit, pointed out "how complacency and self congratulation" had played a key role in preventing the main actors from stepping in early enough while the crisis was unraveling.
Annunziata said: "We were not humble enough to realise the problems we were going to face."
He also called for a "rethinking of the role of central banks", highlighting they should monitor asset prices much more.
He concluded the crisis had flagged up contradictions in European integration. He said: "In the current circumstances, I doubt this uncoordinated approach would be sufficient."
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