FLOWS OF private capital to emerging economies will recover slightly next year, according to new forecasts from the Institute of International Finance.
But the Washington-based association of commercial banks warned that bank lending would continue to fall because of uncertainty over plans to force banks to take part in future IMF rescue plans. Sir John Bond, chairman of the IIF and of HSBC, the banking giant, said: "There is anxiety that the IMF and G7 are supporting involuntary techniques involving the private sector in crisis resolution."
The communique of the G7 meeting on Saturday backed a case-by- case approach to crises, which will reassure bankers, but the banks are alarmed by the recent IMF decision to support a partial default on its bonds by Ecuador. And the communique made it clear that private lenders should not always expect to be repaid in future crises. It said: "No one category of credits should be regarded as inherently privileged relative to others."
Eddie George, Governor of the Bank of England, said: "A dialogue with the private …