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To: Bobby Yellin who wrote (38336)	8/4/1999 2:29:00 PM
From: Rarebird	Respond to of 116790

Behind the Eight Ball: WASHINGTON, Aug 4 (Reuters) - International lenders, stung by complaints they missed the early signs of Asia's financial storm, are taking a closer look at the problems of banking systems around the world. The World Bank and the International Monetary Fund, often at odds on policy proposals, are working together in the new ventures, a direct response to the problems which brought down Asia's tiger economies and then spread to Russia and Brazil. Both institutions have increased the number of staff looking at banking issues and they are sending joint missions to investigate the financial sector of member countries. A dozen countries -- developed nations and developing ones -- have been singled out for special review, although it is not clear if the results of these surveys will be published. "There are three main sources of instability in the financial world, other than temporary things like Y2K," said Manuel Conthe, a former Spanish finance ministry official who joined the World Bank this year as vice president leading the bank's work in the financial sector. "You have budget deficits and exchange rate pegs, and then probably as important as the two other, you have the financial sector, and particularly the banks," Conthe told Reuters. The Y2K computer glitch is casting a shadow over finances amid fears that computers could confuse the date or seize up when 2000 rolls around. Few U.S. banks expect to be affected, but it is less clear what will happen in the developing world. Analysts agree that Asia's problems, which started in Thailand just over two years ago, had different causes from previous international crisis which demanded IMF support. The past focus on taxes, budgets and overspending meant that IMF officials said half-seriously that their initials should actually stand for "It's Mostly Fiscal." The new problems centered on private and public sector debt and on crashing currencies which exposed fragile banking systems. South Korea was days from default when the IMF stepped in with a $58 billion rescue package at the end of 1997. Painful austerity moves cut employment and angry South Korean workers said the initials IMF now stood for "I'M Fired." "It is not just banks," said Conthe. "We need to focus as much on strengthening commercial banks as on sound debt management, which can clearly be a source of vulnerability." IMF officials responsible for monitoring financial sectors said their role had increased since the crisis broke, and bank experts now formed part of the IMF teams carrying out annual Article Four reviews of economies of member states. "The traditional Article Four dealt with macroeconomic issues," said Stefan Ingves, head of the IMF's monetary and exchange affairs department. "We are now adding special studies on assessment of financial sector stability." He added: "If there are problems in the banking sector you need to deal with them to make it possible to deal with a number of macroeconomic problems." Ingves, who joined the IMF from the Swedish central bank, said the IMF's focus was on "the plumbing" of financial systems, ensuring that the right framework was in place. "It's a good thing to have the proper rules and regulation and the proper laws in place," he said. "It does not exclude difficulties in the financial sector, but it lessens the probability. If you put your house in order it lessens the probability of these things happening." Sweden went through its own banking crisis in the early 1990s, evidence that developed economies are not immune from problems in their financial sectors. Monetary sources say a recently completed external report on IMF surveillance asks whether pre-Asia assessments went far enough or identified the right problems. The full report, which recommends a closer look at regional issues rather than at ones facing individual countries, is likely to be published in the coming weeks, after a final review by the IMF board at the end of this month.