Major central banks, regulators working on exit strategy system – official

By Reuters Staff
September 15, 2009

PARIS, Sept 15 (Reuters) – Central bankers are working on a system to ensure they coordinate exit strategies to avoid any untoward consequences of removing stimulus at different times, a Financial Stability Board official said on Tuesday.

The official, who did not want to be named, was speaking after a meeting of central bankers and regulators from G20 countries to prepare for the meeting of leaders in Pittsburgh on Sept 24-25.

“We did discuss the issue of exits from various financial guarantee programs, central bank liquidity support arrangements and so on,” the official said at a press briefing after the meeting.

“We are going to come up with some mechanism for making sure that information circulates amongst authorities about what their practices are and various opportunities for communication and coordination.”

G20 finance ministers and central bankers met in London earlier this month and agreed that exit strategies needed coordination.

International Monetary Fund Managing Director Dominique Strauss-Kahn said on Monday he expected the leaders to take a similar line.

The FSB official noted that some instruments that were put in place during the financial crisis, were already being used less and less by financial instutions.

“That is moving very much in the right direction but there are other methods of support that of course will require more active actions of withdrawal,” the official said.

“It is important that when the exit happens…they are perfectly coordinated across countries so that there is not untoward consequences…We are talking about how we are going to do that.”

The FSB was set up by the G20 to oversee stability of the financial system and ensure that regulatory principles agreed globally are applied consistently in each country.

The FSB comprises all G20 countries and is the successor of the Financial Stability Forum, an informal G7 body. It is chaired by Bank of Italy governor Mario Draghi.

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