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Economy
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2000-03-26 16:13:00-05
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US Federal Reserve Official warns Asia not yet in the clear
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President of New York Federal Reserve Bank says more work needed to stabilize financial systems
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Speaking in Singapore, William McDonough, president of the Federal Reserve Bank of New York, said progress had been made in Thailand, Indonesia, Malaysia and South Korea, in recapitalizing banking systems, eliminating problem assets and improving supervisory frameworks, however, more needed to be done. McDonough feels that the essential elements needed for further progress were effective bank-level management, market discipline and official supervision. Particularly in Asia, he noted, further work had to be completed on the issue of transparency even regarding traditional banking operations. Such transparency increases depositor confidence and thus, makes doing business easier. Official supervision is needed to enforce legal compliance and to insure corrective actions were taken when serious problems arose. He noted that because politics, at its base, was essentially partisan, governments are not well equipped
to make credit decisions. He noted on the positive side, the cessation of the economic contraction that started in 1997 with equity markets returning and foreign investment beginning to flow. Recent experience in Asia and Eastern Europe made it abundantly clear how dangerous policy lending can be.
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