* Bolstering IMF key to making finance safer - Haldane
* Haldane: Korea rules to rein in housing bubbles effective
* Haldane: GDP-linked bonds would ease strain of crises
By Huw Jones
MANCHESTER, England, March 5 The International
Monetary Fund needs more money to become a better bulwark
against financial crises spreading, a senior Bank of England
official said on Wednesday.
Andy Haldane, the central bank's executive director for
financial stability, said the Group of 20 leading economies
(G20) lamented when they met in Sydney last month that U.S.
Congress had still not approved an increase for IMF funds.
The meeting coincided with a surge of volatility in emerging
markets after selloffs triggered by worries about current
account deficits in some emerging economies and the turn in U.S.
"The IMF does not have the fuel in the tank it needs to meet
the respective needs of countries," Haldane told students at the
University of Manchester.
A well-funded IMF could help it step intervene as an
international lender of last resort to underpin an increasingly
interconnected global financial system that allows contagion to
spread more quickly, he added.
"It remains to be seen if their quotas will be improved and
what the future fortunes of the IMF might be, but it's one
ingredient of a reform programme if we are to put global finance
on a somewhat stronger footing than it appears to be on today."
Another flaw in the global financial system is that foreign
exchange reserves are too concentrated in countries that are
unlikely to need them.
"This leaves us with a not altogether comfortable position
of a more joined up global web and therefore somewhat more
fragile global web than previously, and we have not accumulated
the additional insurance that might be needed," Haldane said.
Other ways to shield the global financial system from shocks
would be for countries to issue sovereign bonds linked to
national economic growth, as Bulgaria has done, Haldane said.
In a crisis the interest paid to holders of debt linked to
gross domestic product would fall and ease the strain on
government finances, he said.
International rules for the use of macro prudential tools to
cushion busts and moderate booms would also bolster the global
Haldane is a member of the BoE's Financial Policy Committee,
which sets the tone for financial regulation in Britain and has
macro prudential powers, such as forcing banks to hold more
capital to dampen credit.
He cited South Korea as an example of where a macro
prudential regime has been effective in moderating the housing
market, to limit booms and cushion busts.
Critics say the FPC should also be taking action to cool
parts of Britain's housing market which they say has become
overheated, a view the BoE has yet to agree with.
The FPC meets shortly and is due to report its latest
recommendations at the end of March, with any measures aimed at
the housing market closely watched.
Haldane said the Korean regime has made the housing market
become self-stabilising to some degree and offer a
predictability, allowing markets to do the work of regulators to