CRIS Committee Chairman Wolf Klinz said that the EU does need regulation, but that it must be a 'smart'. A regulatory framework should be created within which the actors are left to move with certain freedom.
The monetary policy stance should be normalized and non-standard measures to support the financial system withdrawn as and when economic and financial conditions gradually improve, ECB Executive Board member José Manuel González-Páramo told the Financial, Economic and Social Crisis (CRIS) Committee on Tuesday. These policy changes are not imminent, he added.
Mr González-Páramo was delivering the keynote speech at a public hearing on the causes and consequences of the financial crisis. Various speakers, including policy makers, university professors and bank representatives analysed different aspects of the crisis in a debate with CRIS Committee members.
The financial crisis posed "exceptional challenges" to central banks, to which the ECB responded swiftly by engaging in non-standard monetary policy and aggressively cutting policy interest rates, said Mr González-Páramo, adding that "there are some clear signs that these measures are having positive effects" on financial markets and the real economy.
"Recent data suggest that the global economic slowdown may be bottoming out, and the freefall in economic activity has come to an end", he continued but warned that "uncertainty still remains high and the economic data remain volatile".
Need for smart regulation
Responding to MEPs' questions on planned new regulation and risk management rules, Mr González-Páramo said that the excessive regulation could indeed kill many opportunities in the financial sector, but this should not mean that the risk management standard should be kept low. Regulation should be better, and better co-ordinated at international level, but this does not necessarily mean more regulation, he added.
Commenting on the need to strike the right balance in regulation, panelist Carlo Vivaldi, the Chief Financial Officer of the UniCredit Bank Austria, said that "the framework should be created, within which you leave the actors to move with certain freedom“.
CRIS Committee chairman Wolf Klinz added that the EU does need a regulation, but that it must be a "smart" one.
"Classic" financial crisis
Excessive risk taking was a key cause of the crisis, said ULB Economics Professor André Sapir. Among other he listed inadequate understanding of different financial products, inadequate regulation and inadequate supervision. He defined the recent turmoil as a "classic financial crisis on a massive scale“.
European Trade Union Confederation Secretary General John Monks warned that the economic recovery was very fragile. "The fact is that we remain in the eye of the storm", he said, calling for more help for young and unemployed people to get work.
Commission counts on European Parliament
Director General of the Commission´s Internal Market and Services Directorate-General Jörgen Holmquist explained various proposals relating to the financial crisis.
Some Member States are trying to limit significantly the powers of the authorities proposed to strengthen EU co-ordination of financial supervision and address systemic risk, he warned, stressing that "we would therefore count very much on the Parliament to maintain the high level of ambition of our proposal".
On the proposal to regulate alternative fund managers (e.g. hedge funds), he said the work in the Council was progressing quickly, "but we now need to hear the Parliament´s view to make progress“.
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