Mr. Camdessus shares his views on a new financial architecture for a globalized world Address by the Managing Director of the International Monetary Fund, Mr. M. Camdessus, at the Royal Institute for International Affairs in London on 8/5/98. The G-7/G-8 Summit will be held in Birmingham next week. High on the Summit agenda will be the issue of how to renovate the architecture of the international financial system in the face of the tremendous changes under way in the global economy. The Asian crisis has been so unexpected in many of its aspects, so broad, so cruel in its human consequences that even before the crisis has run its full course - the leaders of the world want to embark on the design of a new architecture. This is certainly the right thing to do, and the venue of this meeting could hardly be more fitting. Like many other cities in advanced countries, Birmingham has experienced the forces of change in the global economy first hand - from the loss of traditional industries to the challenge of finding new employment opportunities. Moreover, two centuries ago, this city was at the heart of the Industrial Revolution, an era that, like our own, was a time of extremely rapid change. At that time, intellectuals of all schools of thought used to meet frequently in Birmingham - every full moon, I understand - and bring their reflections to bear on the challenges of their new world.
One can even imagine that they want to point out some additional avenues, which, as we have been absorbed by more immediately pressing aspects of our work - we have not, as yet, been able to explore sufficiently. What next? Trying to answer the question of “what next” is a risky endeavor. No doubt with globalization unfolding its opportunities and risks, new priorities will promptly capture our attention and overtake our pre-established agendas. But it is always better to try to anticipate them, particularly when they reflect problems that should already have been addressed, be it: 2  As regards the latter, some follow-up actions are needed, including measures to discourage excessive reliance on short-term financing and strengthen countries’ capacity to withstand sudden shifts in market sentiment. In addition, the Interim Committee has requested the Fund to consider other ways to strengthen incentives for creditors to use available information to analyze risks appropriately and avoid excessive risktaking. Possibilities include introducing provisions in bond contracts regarding bondholder representation and voting in case of negotiations on bond restructuring; extending the Fund’s policy of providing financing to member countries in arrears to private creditors; encouraging strong bankruptcy systems for both domestic and international capital markets; and advising member countries to exercise greater caution in granting public guarantees. We also need to examine the possibility of closer contacts with creditors in order to explain Fund arrangements and, if needed, catalyze private sector financing so as to achieve more equitable burden sharing vis-à-vis the official sector and limit moral hazard.