MANILA, Philippines — The World Bank said it had no plan to contribute to a regional standby fund that would help Southeast Asian banks that might be affected by the world financial crisis, which President Gloria Macapagal-Arroyo had announced Wednesday.

Arroyo on Wednesday said members of the Association of Southeast Asian Nations (ASEAN) had agreed to set up a multibillion-dollar fund that could be “used to purchase what the bankers call toxic assets and recapitalize troubled financial institutions and private companies" — and that the World Bank had committed to provide $10 billion to the fund. [Read story]

But the World Bank vice president for East Asia, Jim Adams, said that while the bank was ready to help countries that would be affected by the crisis, it did not plan to contribute to a regional fund.

"We do not anticipate the establishment of a regional facility and have not discussed commitments of funds at the regional level," Adams said in a statement.

He said the World Bank had held talks with individual countries during weekend meetings of global finance ministers in Washington, but talks had focused on possible ways the bank could help if the crisis spread to the region.

He said the region's economies remained strong, but should be vigilant in the face of the expanding credit crunch.

Arroyo said the 10-member ASEAN and its so-called dialogue partners—Japan, China and South Korea—plus the Asian Development Bank and the International Monetary Fund could also contribute to the fund.

It was not immediately clear why Arroyo made the announcement, rather than Thailand, the current chairman of ASEAN.

Arroyo said the preliminary agreement on the financial package was reached at the meeting initiated by Finance Secretary Margarito Teves and Budget Secretary Rolando Andaya with their ASEAN counterparts at the World Bank and IMF meetings in Washington.

Also in attendance were finance ministers from ASEAN partners and officials from the IMF and the Asian Development Bank (ADB).

“The World Bank indicated that it could initially commit to $10 billion as its contribution to the standby facility,” Ms Arroyo said in her speech at the induction ceremonies for new officers of the Union of Local Authorities in the Philippines in Malacañang.

The Philippines hammered out the initial financial package with its immediate neighbors ahead of next week’s Asia-Europe meeting in Beijing where more bilateral discussions on the matter will be held.

The idea was to establish a regional defense mechanism to cushion the negative impact of the global financial crisis on Southeast Asia, a proposal made by Ms Arroyo last week.

Arroyo said she would urge G-7 countries in Beijing to “consider the emerging economies in the bold actions and ordinary measures that they plan to undertake to ease the crisis in the global financial crisis.”

On the home front, Arroyo trumpeted the government’s efforts to insulate the country from the economic turmoil.

“When some governments were cutting taxes, we raised them … When some governments were deregulating, we were bringing more discipline and order to our financial regulatory environment,” she told local government officials.

Arroyo said that when some governments were going deeper into debt her administration was fiscally prudent, building up reserves and investing in infrastructure.

“These were not easy decisions and I paid a stiff political price in terms of popularity,” she said.

The ADB, with headquarters in Manila, said it was too early to talk of contributions to the facility Arroyo announced, because the region remained economically strong.

Rajat Nag, managing director general of the Asian Development Bank, told Reuters that there were limited risks of another financial crisis in Asia.

He said that while the region's fundamentals remained strong, authorities must draw up plans in case the situation in the region got worse.

"Although real economies [in Asia] may be affected, the banking sector remains fairly sound," Nag said, noting that the region didn't have many toxic assets.

Analysts said there was no immediate need to recapitalize banks or companies in Asia as few were exposed to the crisis in the West, although Asian financial markets had been badly hit by contagion.

Still, an emergency fund could help avert any potential crisis and could also provide a boost to confidence, they said.

"We are not forecasting a crisis scenario where governments will have to recapitalize," Ritesh Maheshwari, a primary credit analyst at Standard & Poor's rating agency, told Reuters.

"There is no such pressing need in Asia yet for such a fund. But it is a good development as it will prepare Southeast Asian nations to better take care of any banking problems that may occur."

Anusorn Tamajai, member of a Thai finance ministry working group on the economy, said Manila may have made the announcement because of political problems in Bangkok.

"This should be good for the region and it's a plan that Finance Minister Suchart (Thada-Thamrongvech) has already studied," he added.

The Thai government is in crisis over a strident campaign by opposition groups seeking its ouster while its troops have exchanged fire with Cambodian forces in a border dispute.

ASEAN members are the Philippines, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand and Vietnam.

East Asian countries had proposed an $80-billion currency swap agreement earlier this year, expanding a much more modest agreement that was set up after the 1997-98 Asian financial crisis, to protect any country facing a balance-of-payments crisis.

Governments around the world have pledged around $3.2 trillion in a variety of schemes to combat the worst global crisis in decades that has toppled financial institutions.

Following a $2.4-trillion European plan to bail out banks, the United States said it would pump $250 billion into American banks to get them lending to each other in an attempt to end the crisis, which began with the collapse of the US housing market.

The crisis has provided plenty of reminders to Asia of its own financial crisis a decade ago, when currencies in several countries crashed and foreign investors fled the region.

The crisis has also prompted European leaders, including French President Nicolas Sarkozy and British Prime Minister Gordon, to press for sweeping financial reforms.

The global turmoil shows the world’s post-World War II financial architecture is no longer adequate, according to them.

“The IMF has to be rebuilt … for the modern financial world,” Brown told reporters in Brussels.

European Commission President Jose Manuel Barroso also cited the need for the United States and the European Union to come up with concrete proposals for global regulation.

European nations were set on Wednesday to back French and British calls for a revamp of the global financial system in a drive to avoid any rerun of the worst credit crisis since the 1930s Great Depression.

European Union leaders arrived in Brussels for a summit just days after halting the free-fall in global markets with a concerted rescue of European banking giants swept up in the US subprime debacle. Rosemarie Francisco, Reuters; Thea Alberto, INQUIRER.net and Christian V. Esguerra, Philippine Daily Inquirer; with editing by INQUIRER.net