GLOBAL – The head of the International Monetary Fund has said it takes a “leap of faith” for people to give their retirement savings to private money managers.

“Individuals placing their retirement savings in the hands of private money managers require a leap of faith,” said IMF managing director Horst Koehler.

“It is critical then to maintain a basic fabric of trust and confidence between savers, borrowers, and financial institutions,” he said. “This is true in mature as well as emerging market economies. He admitted “the record of the recent past has not been spotless”.

“The bursting of the equity bubble has exposed greed and sometimes outright fraudulent behaviour which have undermined some of the trust so essential for well-functioning financial markets,” he added.

He made the remarks at the Institute of International Finance in Berlin last week.

Koehler said it was up to the leaders of the Group of Eight industrialised nations to improve economic growth by accelerating structural change in their economies.

“Recent experience has shown that a surge in economic productivity has not rendered obsolete the law of gravity in finance,” Koehler said. “As a "new realism" replaces the culture of the "go-go years," what is fundamentally needed is a new culture of responsibility-a renewed sense of ethical responsibility, and a broadly-based recognition of the need to nurture a culture of more sustainable value creation.

The IMF has in the past said that structural reform, in particular of the pension system, is vital for Europe to achieve medium-term economic sustainability.