US Treasury Secretary Henry Paulson said yesterday that regulators should not rush to impose new rules on financial markets in reaction to the recent credit crisis.
Paulson, speaking after a meeting with French Finance Minister Christine Lagarde, said the US and France were working closely to monitor markets as financial services companies adapt to a lower appetite for risk.
Financial market turbulence "will take some time" to work through, and regulators must ensure that any new restrictions or requirements for financial services firms do not stunt innovation, Paulson told a news conference.
"There is great vigilance now on the part of regulators, in terms of staying close to markets, as we work our way through this situation," Paulson said. "We want to get the balance right ... we don't want to rush to judgment and overreact."
He insisted that the US economy, and the entire world economy, have benefited from innovative financial products.
Lagarde and French President Nicolas Sarkozy heightened their calls for the European Central Bank to cut interest rates in the wake of the liquidity crunch, as the US Federal Reserve has done.
Meanwhile, French and Spanish authorities reassured bank customers their money was safe yesterday, as jitters ran across Britain amid a run on Northern Rock, a bank suffering from the US subprime credit crisis.
France's major banks are "solid," Lagarde said. "French banks, particularly in relation to German banks, are in a very good position."
The minister said French banks were safe "quite simply because of their structure, their results and the controls carried out by the banking commission."
In Madrid, the Spanish central bank issued a statement saying: "Spanish institutions, like almost all those in the eurozone, have received liquidity operations from the European Central Bank, but that does not mean that are experiencing any difficulty."
It stressed that "no Spanish institution has started any sort of emergency financing procedure."
Britain's Northern Rock -- the fifth-biggest national mortgage lender -- was suffering from a run on its branches and a sell-off of its shares yesterday, deepening a situation that began on Friday.
British finance minister Alistair Darling voiced confidence yesterday that the country's economy could weather the storm surrounding the Northern Rock bank.
He said savers could withdraw their money but stressed the British economy was "strong," favored by low interest rates that would allow politicians and officials to "deal with this particular problem."
Darling was speaking as worried customers queued for a third day outside local branches to withdraw their savings from Northern Rock, which has fallen victim to a global credit squeeze and has had to be rescued by the Bank of England.
The Bank of England gave the lender an emergency loan at the end of last week, prompting customers to withdraw a reported ?2 billion (US$4 billion) in savings.
Northern Rock's market value has slumped by more than half to ?1.27 billion from ?2.69 billion at the close of trade last Thursday.
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