An international drive to impose new regulations in the wake of the financial crisis is fading and global cooperation is diminishing, the managing director of the International Monetary Fund said on Tuesday.
Dominique Strauss-Kahn said world powers had worked well during the height of the crisis in 2008 and 2009, but as the immediate danger passed so did the will to re-write cross border regulations.
One of the lessons of the crisis is that facing global challenges we need to have global answers, Strauss-Kahn told the Romanian parliament during a flying visit to Bucharest.
This lesson is about to be lost, he said.
The IMF chief said individual countries were working on new regulations and creating new supervisory bodies, adding that many of the ideas made sense.
The only problem is, they don't fit together, he added.
Strauss-Kahn's comments reflect growing concern among policymakers over signs of a slowdown in the drive to overhaul the world's financial system after its near-death experience following the collapse of Lehman Bros in late 2008.
The G20 group of economic powers pledged last year to coordinate new regulation for derivatives, hedge funds and bank capital to prevent financial institutions ending up with a repeat of the worst crisis since the Great Depression.
But big differences have emerged as countries have implemented unilateral measures of their own on issues ranging from credit default swaps to hedge funds and bank proprietary trading operations.
Earlier, speaking to a group of Romanian business students, Strauss-Kahn said another financial crisis was bound to hit global markets at some stage in the coming years.
I am sure it will be impossible to ask tax payers to pay again (to save banks), he said, stressing that this made it vital for countries to work together and limit the dangers.
He added that at the G20's request, the IMF would next month present its proposals for imposing a levy on banks which would cover the cost of any future bailouts.
He said it was vital for the G20 to move in the same direction on reform, adding that they did not have much time.
It took 12 years to build Basel 2. We do not have 12 years, he said, referring to global rules introduced in the 1990s to regulate the amount of capital banks must hold to underpin their operations.
I won't say this crisis is forgotten, but the momentum is slowly decreasing and that is a major worry, he said.
(Editing by Mike Peacock)