Banking lobby calls for more measures to avert global recession

Nov 10, 2008, 17:13 GMT

Washington - The world's largest banking lobby Monday called for additional government intervention to help avoid a global recession, but warned that any state takeovers of the private sector must be temporary.

In an open letter to US President George W Bush, who will host a summit of the world's 20 leading economies in Washington on Saturday, the Institute of International Finance called on world leaders to better coordinate their efforts to stabilize the financial system.

'It is crucial for policymakers to take additional coordinated steps to foster recovery in financial markets and to avert a severe global recession,' the IIF's letter said.

The International Monetary Fund last week forecast global growth of 2.2 per cent for 2009. Anything below 3 per cent is rated a recession by the IMF.

Leaders at the Washington summit will be considering additional government measures to stimulate the global economy and launch the process for a regulatory overhaul in the financial realm.

A number of key emerging economies will also take part in the summit, including India, China and Brazil - a nod to just how far the financial crisis has spread since its beginnings in the United States.

The IIF said there was room in many countries for additional fiscal stimulus packages to boost spending and help get banks back on their feet.

The global banking association has welcomed the governments' role in stemming the financial crisis to date, even though many rescue packages involve states buying up shares in a number of struggling banks.

But IIF Managing Director Charles Dallara warned that any takeovers must be 'temporary,' and that governments must sell their stakes as soon as the situation has been stabilized.