Banks 'should raise borrowing cost'

Governments must slash budget deficits decisively and central banks should not wait too long to raise borrowing costs as side effects from measures prescribed to tackle the global recession may create the next crisis, the Bank for International Settlements said.
By The Newsroom
Published 29th Jun 2010, 12:47 BST
Updated 29th Jun 2010, 12:47 BST

The global economy as well as financial markets were on the mend, though the recovery remained fragile in the advanced economies and in the euro zone the debt crisis put the recovery at risk, the BIS said in its annual report, published yesterday. Global leaders meeting in Toronto agreed to take different paths for shrinking budget deficits and making banking systems safer and Washington in particular has warned against cutting too fast.

The head of the BIS Jaime Caruana told the bank's annual meeting there was no time to waste.

Hide Ad
Hide Ad

"We cannot wait for the resumption of strong growth to begin the process of policy correction. In particular, delaying fiscal policy adjustment would only risk renewed financial volatility, market disruptions and funding stress."

Mr Caruana said recently announced fiscal consolidation in some countries together with the publication of bank stress tests in Europe and the support of the G20 for regulatory reforms were important steps forward.

The BIS acts as a bank to central banks and a discussion platform for policymakers. Its annual meeting was held in Basle, Switzerland.

Related topics:WashingtonEuropeSwitzerland