22 June 2009

ECB's Smaghi warns against wasting opportunities for reform

There is a risk the sense of urgency for reform is fading away and nationalistic tendencies and institutional jealousies  are re-emerging. The forces pushing towards maintaining the status quo are gaining strength.

Lorenzo Smaghi, Member of the Executive Board of the ECB, is concern that the systemic risk board would have insufficient power over national authorities and warned that that the EU was unwilling to undertake wholesale reform.

 

With global financial markets showing signs of stabilisation, “There is a risk the sense of urgency for reform fades away and nationalistic tendencies and institutional jealousies re-emerge,” Smaghi told a conference on financial regulation at Bocconi University in Italy.

 

“The forces pushing towards maintaining the status quo are gaining strength. If these forces are not firmly counteracted, this crisis could turn out to have been a wasted opportunity. And the next crisis could move closer,” he said. Concern was also rising about the effectiveness of the EU “in comparison to the reforms that have been put forward in the US”, Smaghi added.

 

Steps to contain risks to systemic stability would consist of alerting, closer supervision and regulation, although the choice of which instrument to use may vary. However a major challenge for macro-prudential supervision relates to the decision-making system capable of accommodating these three options, he said.

 

Full Speech

FT Article

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