World's central banks must improve ties, says UK banker

JAKARTA (JP): The most senior Bank of England member to visit Indonesia in decades stressed yesterday the need for the world's central banks to improve ties.

The deputy governor of Britain's central bank, Howard Davies, said banks and finance ministries needed to cooperate more to prevent repeats of the Barings collapse and catch rogue traders like Sumitomo Corp's copper dealer Yasuo Hamanaka.

He said "one of the major lessons of the Barings collapse is that we need to build relationships with all central banks and finance ministries so that we know each other well enough to explain emerging problems to each other and prevent future collapses.

"The nature of these markets is such that there are strong incentives for people to try and make money for themselves, this is human nature. The banks' task is to make sure that those people are surrounded by controls that pick up quickly what they are doing."

Davies said Indonesia had been strengthening its banking system controls but said there was still room for improvement.

"I don't want to sound alarmist but equally I'm determined not to sound complacent," he said.

"However, that's also the case in London and everywhere. It's a constant process of upgrading networks of information and understanding risk".

Davies, here on a two-day visit, predicted all Southeast Asian financial markets would keep growing but said no city would dominate the region.

"I think there will be a number of competing centers and on the whole that is good because competition means more deregulation, more flexibility and more innovation." (jea)