Thursday 28 Mar 2024
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KUALA LUMPUR (July 25): Financial globalisation needs to be safer and its benefits distributed more equitably, said Bank Negara Malaysia (BNM) governor Datuk Muhammad Ibrahim.

Financial globalisation is a concept that refers to increasing global linkages created through cross-border financial flows.

During his keynote at the 2017 International Monetary Fund (IMF)-BNM Summer Conference today, Muhammad said the Global Financial Crisis (GFC) and the Asian Financial Crisis demonstrated the risks and damage that could be wrought by financial globalisation.

“It amplified the costs of policy and regulatory lapses and failures in crisis prevention and management..it is interesting to observe that despite consequences primarily associated with financial globalisation, trade has received the brunt of the blame

“Let me illustrate-in the wake of the GFC between November 2008 to December 2009, 390 trade protectionist measures were announced or implemented by 19 of the G20 members. Ironically, financial globalisation channels were not addressed as quickly,” Muhammad said.

The governor added it was surprising how policymakers, particularly in the advanced economies, have yet to arrive at a consensus in recognising the harmful effects of free capital mobility that is disconnected with real economic activity.

“This is an issue that many remain divided on, until today. While we have instituted policy reforms to better manage our financial systems and institutions, more can be done.

“We need effective frameworks to ensure financial globalisation contributes to risk diversification, consumption smoothing and efficient intermediation of productive capital across international borders,” Muhammad said.

Ibrahim said the global community should decisively address the risks posed by large and volatile short term capital flows.

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