Call for post-bailout plans

The Straits Times
Nov 12, 2008 | 11:37 AM
Call for post-bailout plans

DEUTSCHE Bank AG Chief Executive Officer Josef Ackermann said governments should give up stakes in banks after state-led bailouts help calm financial markets, wires agencies reported.

'Well-defined exit strategies need to be formulated and implemented,' Mr Ackermann, writing as chairman of the Institute of International Finance, said in a letter addressed to President George W. Bush ahead of a meeting of world leaders in Washington Nov 14-15.

Governments from the UK to Iceland to Washington have committed more than US$3 trillion to try and stem the worst financial crisis since the Great Depression.

Companies such as Royal Bank of Scotland Group Plc and American International Group Inc. have received emergency state funding in return for stakes.

A permanent, larger role for the public sector in financial companies would bring 'wide-spread inefficiencies,' hurting the chances of renewed growth in output and jobs, Mr Ackermann said in his letter, posted on Tuesday on the website of the Washington-based IIF, an association of financial institutions, said the wires.

The leaders of the Group of 20 industrial and emerging countries meet in Washington this week amid looming recession. The world's biggest industrialised economies will all contract next year for the first time in more than half a century as the financial-market seizure leaves companies and consumers starved of credit, the International Monetary Fund forecast this month.

Signs of stability
Mr Ackermann praised the concerted actions among governments, central banks, regulators and the IMF that have helped bring 'some signs of stability to financial markets.'

Still, policymakers need to take additional coordinated steps including on onetary policy to foster a recovery in financial markets and to avoid a 'severe' global recession, he wrote.

The IMF should also expand its role to include financial- market stability, while countries such as Japan, China and major oil-exporting nations need to come up with more money so that the IMF can provide increased financing to countries in need, Mr Ackermann wrote on behalf of the IIF, which represents more than 375 financial companies.

Emerging market countries should also be better represented in international organisations such as the IMF and World Bank, Mr Ackermann said.