IIF chairman says banks ignored warning signs

By John Poirier and Karey Wutkowski

WASHINGTON (Reuters) - Banks ignored signs of mispriced risks and dangerous leverage ratios that indicated the impending credit crisis, the chairman of a global banking organization said Thursday in releasing a report on the financial industry's response to the turmoil.

"If you go back over the last two years, there were a lot of signals that indicated we are going just a little bit too far," said Institute of International Finance Chairman Josef Ackermann, who also chairs the management board at Deutsche Bank AG.

The IIF reports said recent central bank efforts to provide liquidity had been impressive but called on the financial industry to do more to restore confidence and credibility.

Firms should have a company-wide focus on risk and name a chief risk officer the report said. They should also have robust methods in place to monitor liquidity.

"We are accountable for a large part of the problems," Scotiabank Chief Executive Rick Waugh, an IIF board member, told Reuters.

Restoring the financial industry's credibility will not be easy, said the report, "especially as the global economy has entered a downturn, weighed down by surging commodity prices and rising inflationary pressures, as well as continuing market strains."

The IIF's board includes representatives from Deutsche Bank AG, Citigroup, Barclays, Bank of America, and Credit Suisse, among others.

Recent actions by central banks, such as the U.S. Federal Reserve, to combat liquidity pressures have been "highly encouraging," the report said.