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Banks should hike Cap-adequacy, but no overregulation: Alan

Low capital adequacy might have led US banks to collapse in the global crisis but overregulation, as in India and China, was too not good as it impeded growth, Financial guru Alan Greenspan said on Monday.



Mumbai: Low capital adequacy might have led
US banks to collapse in the global crisis but overregulation,
as in India and China, was too not good as it impeded growth,
Financial guru Alan Greenspan said on Monday.

The single most lesson of the `once in a century crisis`
was that banks should have larger capital adequacy but
overregulation is certainly not good for higher growth,
crucial for poverty alleviation, Greenspan told a video
conference.

Mumbai: Low capital adequacy might have led
US banks to collapse in the global crisis but overregulation,
as in India and China, was too not good as it impeded growth,
Financial guru Alan Greenspan said on Monday.

The single most lesson of the `once in a century crisis`
was that banks should have larger capital adequacy but
overregulation is certainly not good for higher growth,
crucial for poverty alleviation, Greenspan told a video
conference.

Tracing the reasons of global meltdown, Greenspan said
the end of cold war and collapse of Soviet Union and centrally
planned economy changed the course.

The economies of Central and Eastern Europe moved from
planned to market economy and emerging economies like India
and China witnessed high growth.

This induced extra-ordinary growth in the global economy,
he said, adding, risk became significantly underpriced and
there was an era of low interest and low inflation for a long
period.

Dwelling at length on the global crisis, Greenspan said
there was a very large money supply and the cash balance has
doubled in the US.

This, he said, has to be liquidated very quickly to avert
any imbalances in the system.

Inflation may remain low in US until 2012, he said,
adding, a quick liquidation may result in rising inflation
that may go into double digits.

Rising inflation may not be an economical problem but
can create a political problem, he said, adding, there was no
way out of it.

Bureau Report

From Zee News

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