New bank rules help avoid booms, busts – Trichet

BASEL – New global rules for bank oversight should help ease boom-and-bust cycles and prevent the build-up of asset bubbles, top central bankers said yesterday.

European Central Bank President Jean-Claude Trichet, who chaired talks on the global economy at a Bank for International Settlements meeting, said the outlook for the global economy had brightened but policy makers could not afford to be complacent and would push on with reforms to bolster the financial system.’We have to pave the way for drawing all the lessons from what has been observed in the past and to avoid precisely the phenomenon of booms and busts that we have observed,’ Trichet said when summing up the discussions.’We (must) avoid these kind of bubbles, absence of attention to risks, abnormal risks being taken, paving the way for abnormal bubbles of credit and of assets.’Central bankers and regulators agreed on Sunday on new banking rules which would make banks set aside more profits as a cushion against hard times and face limits on how much debt they can run up.Trichet said the feeling among central bankers gathered in the Swiss city of Basel, following a Group of 20 meeting in London, was one of increased optimism but also caution.A large part of the global economy was probably now out of a period of free-fall and recent indicators had turned out better than expected.G20 policy makers said on Saturday although the global economic outlook had brightened, policy makers would not remove economic stimulus until the recovery was well entrenched. – Nampa-Reuters