Huw Jones - Oct 14, 2009

LONDON (Reuters) - A global body with legal powers may be needed over time to enforce the world’s new financial rules, the Financial Services Authority (FSA) said on Wednesday.

The FSA’s newly appointed and first director of international affairs, Verena Ross, said the Financial Stability Board (FSB) was key to ensuring all gaps in regulation between securities, insurance and banking sectors were plugged.

Formerly known as the Financial Stability Forum, the FSB was expanded in April to include central bankers and finance ministry and regulatory officials from all Group of 20 (G20) countries.

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By Pieter Bottelier - May 29, 2009

Since People’s Bank of China governor Zhou Xiaochuan’s proposal for reforming the international monetary system was published on March 23, there have been new developments with regard to the international use of the Chinese currency, the renminbi, also referred to as the yuan.

The historical context of governor Zhou’s proposal and the prospects for the international use of the renminbi are interrelated. In spite of the generally negative press reports in the United States, Zhou’s proposal was couched in careful, professional and non-provocative language. Although the proposal may have been partly motivated by domestic politics, it does reflect deep-rooted concern in China that the international financial crisis and subsequent US responses to it could undermine the purchasing power
of the dollar.

Since most of China’s US$2 trillion plus reserves are invested in dollar-denominated financial assets, Beijing’s concerns are understandable. While some in the United States argue that China should not fret about excessive dollar exposure - because that is the result of its controversial exchange rate policy - it should be recognized that China’s worries about the future of the US dollar are widely shared and that Zhou’s proposal appears to have been well received in many quarters around the world.

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