THE BUNDESBANK president, Dr Hans Tietmeyer, said he saw no chance of softer criteria for European currency union and his French counterpart, Mr Jean Claude Trichet, said he believed both countries would qualify.
Speaking at a World Economic Forum panel discussion on Economic and Currency Union (EMU) yesterday in Davos, Switzerland both central bankers agreed the EU cannot lower its Maastricht entry standards for joining the common currency from 1999.
"There is no chance for a softening of the criteria. The criteria have to be strictly applied," Dr Tietmeyer said. "I am personally convinced France and Germany will make it," Mr Trichet said referring to the 1999 EMU launch. "We must have a credible currency. The euro (common currency) should be as credible as the most credible currency in the area."
Dr Tietmeyer said he fully supported a call by German Finance Minister Mr Theo Waigel for new EU rules to exert fiscal policy discipline on countries once they have joined the common currency.
European Union Monetary Affairs Commissioner Mr Yves Thibault de Silguy, said in Zurich he was convinced that EU nations would meet criteria for EMU on time and that EMU would take place in 1999 as planned.
Senior finance officials told the meeting that banks must improve internal controls and be wary about profit linked pay for traders to prevent collapses of the kind that hit Barings and Daiwa.
"The Barings and Daiwa episodes have shown up the importance of internal controls and adequate remuneration structures," Bank for International Settlements general manager Mr Andrew Crockett told a meeting at the World Economic Forum.
Bank of England deputy governor Mr Howard Davies said it was absolutely vital for banks to have good management information systems and controls.
In the case of Barings, a permissive management environment had enable the bank's entire capital base to be exported to Singapore to cover the trading of a single trading, he added.
Mr Crockett said that, in the case of the US Savings and Loans crisis of the 1980s, he said, it was clear with the benefit of hindsight that the combination of 100 per cent deposit insurance, fixed rate assets and floating rate debt posed dangers. "The lesson is that regulators must intervene early," he added.
Mr Davies acknowledged the Bank of England was not free of all blame for the Barings crisis. But he stressed there had never been any systemic crisis in the British banking system and the cost of British banking failures had been low.
