LONDON (MNI) – A system allowing for the orderly restructuring of
systemically important financial institutions (SIFIs) is needed to
reduce moral hazard, European Central Bank Governing Council member Axel
Weber argued on Thursday.
In the prepared text of a speech given at the UCL Economics and
Finance Society here, the Bundesbank president dismissed concerns that
tighter regulations, such as the bank capital and liquidity guidelines
in Basel III, would hamper economic growth by restricting credit access.
“[A] comprehensive cost-benefit analysis by the Basel Committee on
Banking Supervision has revealed that fears of a significant negative
impact on growth are unfounded,” Weber said, adding that banks would be
given an “adequate transition period” to boost their capital base before
the rules come into force.
“This favourable overall assessment of the macroeconomic impact of
well-designed regulatory reform highlights the fact that there is no
inherent conflict between the objectives of a more stable financial
system and of ensuring strong and sustainable growth.”
Weber also commented on the shadow banking sector, arguing that a
broader regulatory view was warranted to discourage regulatory
arbitrage and to allow regulators to keep track of how the sector
evolves.
“With stricter rules for the regular banking sector, there is a
clear danger that more and more activities will flow around the newly
erected dikes and add to the ocean of unregulated activity at our back,
thereby increasing systemic risk,” Weber said.
“Thus, we have to turn our heads, take a close look at the shadow
banking sector, understand what is going on there and ultimately control
the systemic risks that we have identified.”
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