PARIS (MNI) – Efforts to reform the global economic system should
go beyond greater flexibility in exchange rates to encompass economic
policy and structures, European Central Bank Governing Council member
Christian Noyer said Wednesday.

These are the objectives France has set out for its presidency of
the G20 this year, the governor of the Bank of France told a banking
conference here.

“France wants to open the debate,” he said. The goal is “not to
achieve a great overhaul,” but a rather to draw lessons from the crisis
on underlying trends, he said.

While the present monetary system allowed us to make it through the
crisis, it needs to be better adapted to current circumstances, for
example to reduce the excessive volatility of capital flows and the
misalignment of exchange rates, Noyer said. The excessive accumulation
and concentration of forex reserves must also be corrected to assure
lasting stability.

“France hopes that the G20 can establish a common analysis” of the
causes and consequences of the existing problems of the global monetary
system, he said. For this the cooperation of all G20 members, with the
support of the International Monetary Fund, will be necessary to tackle
this delicate and complicated issue.

The crisis also demonstrated the need for “reactive monetary
policy,” Noyer said, citing the numerous changes the ECB has introduced
in the context of its policy.

Noyer reiterated his reservation about the new capital ratio
proposed under Basel III, calling for significant, rapid corrections in
order to allow for good banking management.

The management of risks linked to over-the-counter derivatives
trading should also be improved, he said. Noyer also expressed hope that
the market would provide more details on the components of asset-backed
securities in order to reestablish confidence in the segment.

The determination of regulatory authorities to implement concretely
the guidelines set out by the G20 is “very strong,” he said.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

[TOPICS: MT$$$$,M$$EC$,MGX$$$,M$$CR$,M$F$$$]