Wealth funds under scrutiny

By Lesley Wroughton

WASHINGTON (Reuters) - Global finance chiefs on Saturday called for a more broad-based effort to calm financial markets, including tighter scrutiny by the International Monetary Fund and other institutions of increasingly powerful state-owned investment funds.

This year's fall meetings of the International Monetary Fund and World Bank come amid a slowing pace of global growth and heightened risk from recent turbulence in world credit markets and soaring oil prices.

That has particularly affected Group of Seven rich nations whose finance ministers and central bankers met on Friday and concluded that their growth will suffer because of ongoing turmoil in markets.

By contrast, developing countries that are well represented among IMF members have been emboldened at these meetings by the fact that their growth rates are thriving and have used the opportunity to flex their economic muscle.

"The irony of this situation: countries that were references of good governance, of standards and codes for the financial system, these are the very countries that are facing serious problems of financial fragility putting at risk the prosperity of the world economy," said Brazilian Finance Minister Guido Mantega.

TABLES ARE TURNED

After years of hearing from developed countries about the importance of prudent economic policies, developing nations felt they clearly had the upper hand, with China and India leading world growth and rich countries' economies slowing.

Meanwhile, developed countries called on the IMF to increase its monitoring of growing state-backed wealth funds that hold surplus reserves mainly from oil exporters and China.