Cullen explains problems that need fixing

Labour Finance Minister Micheal Cullen
Labour Finance Minister Micheal Cullen
A Labour-led government would take an active role in promoting change in international financial markets, Finance Minister Michael Cullen said today.

He said the current crisis had a number of causes, and not all of them could be dealt with by improved regulation.

"Crucial changes can be made which should help make any future financial market disturbance less catastrophically destabilising than this one has been," he said in a statement.

"The first need is far greater disclosure requirements on financial institutions.

"Much of the current crisis has its roots in the complex, interwoven web of even more unreal debt instruments of which regulatory authorities, rating agencies and others were not fully aware."

Dr Cullen said that as a result, instruments which were in reality no better than junk bonds had high ratings, yet collapsed under the pressure of the first "chilly economic wind".

Secondly, Dr Cullen said, prudential regulators would need to have the power to prevent issuances which were patently unrelated to any adequate asset backing.

The third element would need to be much better co-ordination between regulatory authorities, both within national jurisdictions and across them.

"Finally, as the current financial crisis starts to abate, though the real economic consequences will go on for some time, it is important that there is international co-ordination of the current array of emergency measures which have been taken and how to exit from them," Dr Cullen said.

"In future we need to avoid the race to the bottom in terms of emergency measures such as deposit guarantee schemes which has characterised this crisis."

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