The Organisation for Economic Co-operation and Development says stronger regulation of the credit markets could prevent a recurrence of the credit crunch caused by chaos in the US sub-prime mortgage market.
The Organisation's latest report on the economic outlook for OECD countries reads: “There may be a need, for instance, for more encompassing supervision of US sub-prime mortgage markets, with greater attention to non-bank originators which have often evaded effective scrutiny.
It also calls for greater education and disclosure to help prevent predatory lending practices.
Finally the report suggests new, more aggressive credit rating agencies would help prevent a similar system arising in the future by increasing transparency.
“Given the swathe of re-ratings in recent months, more pugnacious and inquisitive rating agencies could help bring this about”, says the report.
The OECD claims that the problems in the US sub-prime market, and the resulting market turmoil, will dent economic growth in 2007.
The organisation reduced its expectation of economic growth for the world’s seven largest economies by 0.1% to 2.2%.
However, the report warned that estimates were likely to be on the upside because it was too early to estimate the full effects of the current crisis.
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