To prevent another global financial crisis, the Institute of International Finance on Wednesday issued a series of recommendations to lenders and government officials in developing countries.
"Both borrowers and lenders must do a better job in making sound decisions if the problems of the past 18 months are not to be repeated," John R.H. Bond, chairman of HSBC Holdings PLC and of the international banking group, said in a prepared statement.
Quarterly meetings between government officials and lenders should be held to discuss a country's economic condition and give investors the opportunity to recommend policy changes that could avert a crisis, the group said.
"This initiative would bring the borrowers and the lenders and investors together in a more consistent and regular fashion," Mr. Bond said. "It would secure exchanges of information and develop a pattern of relationships that can help shape policy change by sovereign borrowers, increase market understanding of the situation of borrowers, and provide a framework for cooperation when problems arise."
Regular meetings between Mexican officials and creditors have helped stabilize that country's financial system, the group said.
Developing countries that do suffer from a financial crisis could enlist the institute, whose 300 member banks come from 56 countries, to help explain economic recovery plans to lenders and equity investors, the group said.
Countries also should:
Publish more economic data, including confidential information now provided only to the International Monetary Fund.
Disclose timely data on bank lending.
Order the Bank for International Settlements to publish tables showing how fully countries have implemented its core principles for banking supervision.
Bar IMF funding for countries that have defaulted on private-sector debt.
Avoid comprehensive capital controls, though temporary limits on short- term capital flows may be acceptable.
Industry officials generally welcomed the institute's call for more disclosure, but some questioned whether it would be effective.
"You are kidding yourself if you believe a lack of data was the cause of the Asian problems," said William A. Brown, managing director and chief economist at J.P. Morgan & Co. "Everyone saw these risks but thought they could be handled."
Still, better communication could help lenders understand the unique political, legal, and economic risks in developing countries, said Wayne M. Ayers, chief economist at BankBoston Corp.
The institute on Wednesday also released data showing the lingering effects of the global financial crisis. Private credit to developing countries was $39 billion last year, down 67% from 1997. It is projected to fall to $17 billion this year.
Lending to Latin America is expected to hit $10.4 billion this year, a 75% fall from 1998. Asian lending is not expected to recover in 1999.
The group's 96-page proposal also includes scores of more technical recommendations. Copies of the full report are available by calling 202- 857-3616.
Separately, a group of leading financial experts on Monday unveiled a commission to study whether the global economic infrastructure should be revamped.
Billionaire financier George Soros and former Federal Reserve Chairman Paul Volcker will join a panel of 26 other leading names from the private sector, government, and academia. Peter Peterson, vice chairman of the Federal Reserve Bank of New York, and Carla Hills, a former U.S. trade representative, will jointly lead the group, which is being sponsored by the Council of Foreign Relations, a New York-based think tank.
