IMF's de Rato speaks on repricing at Ambrosetti

Source: Stock Market Digital

Date :10/09/2007 09:10:32

The Financial Times reports Rodrigo de Rato, managing director of the International Monetary Fund, as saying the repricing of risk in the financial markets should be good for the medium-term stability

“This reckoning is probably a welcome one but it does not mean that it will be a painless one,” he observed at the Ambrosetti forum in Cernobbio, Italy.

According to the FT, he said the credit squeeze was a “serious crisis” that was still unfolding with a high degree of uncertainty. He said its effects would be limited by the strength of the global economy and the high credibility of monetary authorities around the world.

Mr de Rato, outgoing head of the IMF, said regulators needed to learn lessons from the incorrect pricing of risk in the US housing market that led to the sub-prime mortgage problems.

He suggested that regulators should re-examine the legal perimeters of financial institutions to assess the real risks from off-balance sheet structures.

Mr de Rato was attending a conference of leading policy makers at which private-sector financiers urged the Federal Reserve in the US and the European Central Bank to do more to reassure the markets.

Separately, the paper says, four trade bodies for global bond markets will this week call for “immediate and ongoing disclosure” on where US sub-prime mortgage risk resides among investors who use short-term debt markets for funding.

It is hoped that such moves, to be outlined on Wednesday, will help restore confidence in the short-term asset-backed commercial paper markets that have all but seized up in recent weeks.