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ECB head: More to be done on financial regulation

ECB head: More to be done on financial regulation

The head of the European Central Bank said recent market turmoil proves the global economy is not back to "business as usual" and that governments need to redouble their efforts to strengthen the financial system against new shocks.
Speaking on the third anniversary of the collapse of U.S. investment bank Lehman Brothers, Jean-Claude Trichet said governments must move quickly to implement internationally agreed rules on strengthening bank finances _ known as Basel III _ and an agreement on keeping "systemically important financial institutions," or SIFIs, from pulling down the global economy if they fail.
"As the continuous challenges demonstrate clearly, we are not back to 'business as usual' as some thought some months ago," Trichet said at a financial conference before a meeting of eurozone finance ministers in Wroclaw. "We need resolve and fortitude of the public authorities and lucidity on the part of the private sector.
He said the world's central banks were working together and called Thursday's decision to join in providing dollar credit to struggling banks "a clear illustration of our very close cooperation at the global level and of the unity of purpose" that is needed.
The ECB is playing a key role fighting Europe's debt crisis, providing unlimited credit to banks and taking the risky step of buying Italian and Spanish government bonds in the secondary market. That is aimed at driving down borrowing costs that threaten those governments with financial collapse.
Trichet said collective global action had helped keep the 2008 Lehman collapse from turning into an outright depression. The investment bank's failure inflicted heavy losses throughout the globalized financial system and froze credit and lending, contributing to a deep recession.
Even though a worse outcome was prevented, Trichet warned that "we still have a long way to go to move beyond this crisis."
He said voices had been raised recently against the new bank financing rules and the measures to impose capital surcharges on institutions deemed to big to be allowed to fail.
"In a crisis period where confidence is of the essence, it would be extremely damaging if the authorities were to hesitate, demonstrate an absence of resolve and of the fortitude that is required by the circumstances," Trichet said.
"I see resistance of some in the financial sector against Basel III. I see similar messages on the SIFIs. For me, it is crystal clear: what has been decided is decided."
Trichet, who chaired the group working on systemic institutions, is leaving office Oct. 31 after eight years as head of the ECB, the eurozone's chief monetary authority.


Updated : 2021-10-22 04:53 GMT+08:00