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19 October 2009

ECB Gertrude Tumpel-Gugerell: the European response to the financial crisis


With regard to the regulatory response, Tumpel-Gugerell believes that many regulatory issues can only be truly tackled at the global level. Indeed, under the aegis of the G20, authorities worldwide have agreed on a common agenda for regulatory reform.

Tumpel-Gugerell made a presentation divided into three areas: the monetary response to the crisis, the policy response and finally the regulatory response.

Concerning regulation, she believes that many of the regulatory issues can only be truly tackled at the global level. Indeed, under the aegis of the Group of Twenty, authorities worldwide have agreed on a common agenda for regulatory reform. She recalled the progress made thus far and highlighted the measures that are of great importance. She focused on what she believes to be the three key topics on the regulatory reform agenda:
·         Further strengthening of the prudential framework for banks
·         Extending the scope of regulation to all systemically important institutions, markets and instruments
·         Strengthen oversight of systemically important financial institutions
She concluded saying that:
·         Policymakers around the world agree on the need to provide public support under current circumstances. But they also acknowledge that institutional and macroeconomic differences between countries have caused some diversity in the design of support plans.
·         In terms of monetary policy, in the euro area the priority has been to repair the functioning of the money market. This reflects the crucial role that commercial banks in the euro area play in funding businesses and households, and the importance of the money market for these banks.
·         There is a need to be more wary of financial stability matters. Here regulatory reform is on the way and greater focus on macro-prudential supervision is being implemented. Regulation should set the right incentives for market participants, balancing profit-seeking and risk-taking. International cooperation in this area is vital to set a level playing field for all financial institutions and avoid regulatory arbitrage.
 


© ECB - European Central Bank


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