BASEL, Switzerland, June 29 (Reuters) - The Bank for International Settlements urged emerging market countries on Monday not to build up foreign exchange reserves further in response to the financial crisis.
"There were very large foreign exchange reserves built up, mostly in the emerging world in the aftermath of the Asian crisis," BIS chief economist Stephen Cecchetti told reporters after the bank's annual general meeting.
"There is a hope the lesson taken away from the current experience is not that these countries need even larger foreign exchange reserves. These things are not terribly efficient. Our concern is that these things are going to be built up even further as a consequence."
In its annual report, the BIS said emerging economies should have enough hard cash reserves to survive the worst of the credit crisis but reserve pooling may ultimately reduce the need for foreign currency stockpiling.
BIS general manager Jaime Caruana said governments should aim for sustainable public finances "otherwise the dynamics of debt can become something which is difficult to control".
"We think certainly there has been signs of improvement in the economy and the idea the economy is bottoming out at the end of this year is a reasonable idea," he said.
Caruana also backed calls from policymakers for a simple leverage ratio on banks to complement the existing Basel capital charges framework that assesses risk in a more sophisticated way.
"I think today we all accept this is a complement ... is a good idea, it helps. A leverage ratio is simpler and it can help to contain in some cases excessive leverage. The regulators are moving into this complementarity and putting both together. It will be a combination of elements." (Reporting by Krista Hughes and Huw Jones; editing by David Stamp)