Presentation on theme: "VENUE: TRANSCORP HILTON HOTEL, ABUJA"— Presentation transcript:
1 VENUE: TRANSCORP HILTON HOTEL, ABUJA WHAT KINDS OF REFORMS ARE NEEDED FOR THE GLOBAL FINANCIAL SYSTEM? BY PROFESSOR DAHIRU HASSAN BALAMI DEPARTMENT OF ECONOMICS UNIVERSITY OF MAIDUGURI P.M.B. 1069, MAIDUGURI TEL.:BEING A PAPER PRESENTED AT THE CELEBRATION OF 50 YEARS OF CENTRAL BANKING IN NIGERIA, A 3-DAY INTERNATIONAL CONFERENCE ON CENTRAL BANKING, FINANCIAL STABILITY AND GROWTHVENUE: TRANSCORP HILTON HOTEL, ABUJADATE: MAY 4TH – 6TH 2009
2 INTRODUCTION OUTLINE The Global financial System (GFS) Perspective of the Global Financial MarketThe causes of the current Global Financial CrisisImpact of the Global Financial Crisis.* Short term ReformsBail outs and consumers protectionCreation of Global Coordinating AuthorityDiscouraging Intellectual DishonestyCredit Innovation which should favour aggregate demandDiscourage intellectual dishonestyCreation of new rules and confidenceLong Term ReformsReform in the Political ArenaReforming existing institutions and creating new oneIntroduction of a new Global Reserve currencyReduction of Greed and Corruption in Global financial systemConcluding remarks
3 INTRODUCTIONThe world’s financial system is an integrated system with many material aspect with the merits and de-merits of integrationWhat are the causes of global financial crisis?What is wrong with current arrangement of global financial system leading to crisis?How does the present global financial crisis differ from the Asian crisis?What are the impacts of the financial crisis at the global level?What kinds of reforms are needed for addressing the current global financial crisis?Will the reforms be local, regional or international?What are the major reforms that might be needed to address the root causes of the financialcrisis?How will the reform management mechanism give poor countries a chance to protect themselves within the international system?
4 MERITS AND DE-MERITS OF GFS The GFS permits access to finance and development, better management of country’s and promote the development of local and regional banking sector.DEMERITSHowever, it can expose countries to volatility and loss of macro-economic sovereignty due to Global nature of the economies. The current global financial crisis has affected adversely the GFS and threatened the future stability of the financial markets as well as its negative effect on individual economies in the system with its consequent loss of confidence in the system if not corrected or reformed to take care of the inadequacies.
5 MAJOR INSTITUTION OF THE GFS PLAYERSWorld Bank- provide funding, take up credit risk and offer financial favourable termsWTO- settles trade disputes, negotiate international trade agreementsIMF- keep account of international balance of payment of members states, act as lender of last resortGovernment institution- Tax authorities, CBS, SEC, ExchangesPrivate participants- commercial banks, pension funds, hedge funds and private equityLegal framework and* Eurozone* NAFTA* Commonwealth of Independent Nations (CIS)
6 PERSPECTIVES OF THE GFS Washington concern approachNeo-marxist approachSocial democratic approach
7 Causes of Global Financial Crisis The slump in the US mortgage housing loansCredit crunch/derivativesHuge imbalance between U.S (deficit) and some emerging economies surplus (China)Weak financial institutionExchange rate problem adjusted by systemOver-the-counter default swaps derivativeRegulatory controls were not adequate
8 IMPACT OF GFS CRISISNationalisation of companies, Fannie Mae and Freddy MacBank run in UK- Northern RockRising unemployment and job loosesSlowingFall in foreign reserve of most developing country like Nigeria.Rising level of poverty about 50million in 2009Important of GFC on LDCsFall in government revenueFall in exchange rateDeficit balance of paymentFalling of capital marketRising of level of unemployment and inflation
9 ACTION TAKENThe setting up of a United Nation panel to review some of the roles of the IMF and World Bank. This was done through coordination approach by the world largest economies.
10 Short term reforms Bail outs and consumers protection Creation of Global Coordinating AuthorityFocus on real stabilityDiscouraging Intellectual DishonestyCredit Innovation which should favour aggregate demandDiscourage intellectual dishonestyCreation of new rules and confidence
11 LONG TERM REFORMS Reform in the Political Arena Reforming existing institutions and creating new onesIntroduction of a new Global Reserve currencyReduction of Greed and Corruption in Global financial system
12 CONCLUDING REMARKSIt is obvious from the past and present that market mechanism can not function efficiency without moderate government interaction. The growing culture of greed and pressure of strong financial incentive to engage in dubious practice, and failure of public authorities to prosecutes and punish complex financial crime in years leading to the present crisis and illegalities is a factors leading to crisis.The reforms whether short or long term should be comprehensive, inclusive and well tialored to provide a suitable GFS.
13 GRATITUDEI wish to thank the Central Bank of Nigeria and organizers of the celebration of the50years of Central Banking in Nigeria, for giving me the privilege to speak on the important issue relating to the needed reforms in GFS.