My question at the Civil Society Townhall Meeting at the IMF and the World Bank:

The following is the question I made on September 22, at the Civil Society Townhall Meeting at the IMF and the World Bank: 

“Mme Lagarde, Mr. Zoellick, if bank regulators had defined a purpose for our banks, before regulating these, we might have had a different bank crisis, but none as large, systemic and dangerous as this one. 

And so I ask the World Bank and the IMF, our global development and stability agents, when are you going to require the regulators in the Basel Committee to openly and explicitly define the purpose of our banks… so as to see if we all agree.”

And Mme Lagarde answered: 

“On the purpose of banks, it is a very good debate to have, and it is one that I think the Vickers Commission Report is actually helping to build--what are banks for, and what are the state guarantees or general deposit guarantees intended for? Is it to actually guarantee the savers and the depositors, or is it something that is intended to fuel and benefit other activities that are really within a completely different realm of activities? 

My sense is that the most critical mission for the banks--and that is what we are trying to say when say that banks have to rebuild their capital buffers--is to actually finance the economy, first and foremost, and that should be really the critical mission” 

And here is how Mr. Zoellick answered: 

“Your point about the Bank regulators is a particularly intriguing one, and let me share with you a little anecdote. 

Bank regulators come out of the world of central banks, and central banks will be the last bastion to fall in openness and transparency. When Pascal Lamy, who is head of the WTO, who has dealt with civil society groups for many years, as I did, starting in the trade area--and I met with Mario Draghi at that time, head of the Financial Stability Board--we shared with him a story that some union groups had come to Basel and tried to get in the door and talk to people, and they were met with screams of uncertainty. And we have suggested--and I'll just pass this along--that they also have to build some outreach mechanism through the Financial Stability Board and openness and transparency. And I will just share this from my own learned experience. Some institutions--central banks in particular because of the sensitive market information--build in cultures of this, and it is understandable, but then, on the policy level, as you suggest, people need to get used to being more open about it. And I just think that that is something, again, that we can try to work with you with as a general principle. I think the world will move more in this direction, but it will take some time on it. 

And I agree with Christine's response to you about the fact that the good news is, as the discussion in Britain showed, that people are starting to debate the exact purpose of banks.” 

You can find the question in the video, minute 48:40, with Mme Lagarde´s answer minute 55:20 and Mr. Zoellick´s on 1.04:15. http://www.imf.org/external/am/2011/mmedia/view.aspx?vid=1176766541001

From both answers you can deduct what I have always and most loudly criticized about the Basel Committee, namely that they have regulated the banks without defining or even considering what is the purpose of the entities they regulate… How on earth can you regulate something well without defining its purpose?