PARIS (MNI) – The volatility of commodities prices is a matter of
concern for all nations and should be addressed through stronger rules
governing the trading of commodity derivatives, France’s Finance
Minister Christine Lagarde said here Tuesday.

In raising the issue of greater commodities regulation, Lagarde was
reiterating one of the central themes of her government’s presidency
this year of the G20.

Speaking at a conference on banking, organized by The Economist,
Lagarde noted that the topic of commodities prices was the one that
“attracted the most comments” at recent meetings of G20 ministers and
central bankers. “It is certainly an area where I would feel there was
room for a consensus,” she said. “It’s not just for developed countries
but it’s also a matter for emerging economies and the least developed
economies. Volatility, massive price movements are going to put all
players in difficulties.”

Lagarde made clear she was talking not only about oil, but also
about metals and food commodities such as wheat. “It would be good to
temper that volatility,” she said, though she acknowledged it is
sometimes the “legitimate” result of hedging by commercial players.

“We’ve managed to address financial derivatives. Now, we need to
address commodity derivatives and the way they are organized,” she said.

Lagarde also stressed the importance of getting globally
coordinated financial governance just right. She emphasized the dangers
of both under-regulation and over-regulation.

The minister noted that the new Basel 3 capital ratios, quickly
created in the face of the financial crisis, still needed to be
implemented under specifically European regulations. And, she said that
“phasing in over time is a necessity if we want to make sure that banks
are capable of financing the economy.”

With regard to Basel liquidity requirements, there is “still a lot
of work to be done,” she said. “There is still considerable debate over
what is necessary, what is excessive and what needs to be phased in over
time.”

Lagarde urged that there be a “continuous dialogue” between
financial institutions and regulators, since there would inevitably be
aspects of regulation that needed to change and evolve over time. The
goal, she said, is a two-way street leading to “solid, sustainable and
balanced growth,” and ultimately to job creation.

The state is a key stakeholder in that process, she said, noting
that when the crisis hit, “there was no other door to go to” to get the
assistance that was needed. She reminded that governments and other
public agencies across the world had attacked the crisis “at great
expense” and sometimes “slight benefit,” by flooding markets with
liquidity and helping banks refinance “when banks were short of any cash
available and any trust available — which was a bigger need.”

The government is “still a stakeholder,” she said, because “it is
our collective responsibility to avoid another similar event.” Public
finances “around the world” cannot be called on again to “cure” a
similar crisis, she warned.

–Paris Newsroom, +331-42-71-55-40; bwolfson@marketnews.com

[TOPICS: M$X$$$,M$$CR$,MGX$$$,MT$$$$]