Speaking at an institutional investor conference, Austrian finance minister Hans Jörg Schelling warned that institutional investors providing financing for projects and companies could distort the lending market because they are less regulated than banks.
Schelling reiterated concerns raised by the International Monetary Fund in its October 2014 Financial Stability Report concerning ‘shadow banking’. “Regulation is a cost factor banks have to take into account and other lenders do not,” he said. Schelling said the regulatory situation in Europe was becoming “more and more dramatic”, with some new requirements “actually being pure nonsense”.
This increase in regulation – particularly for banks – means the world is “en route to a credit squeeze”, he warned.
However, Hartwig Webersinke, an economist at the University of Applied Sciences in Aschaffenburg, argued that the increase in regulation in the wake of the financial crisis was “cyclical”. Webersinke argued that many of the new regulatory requirements were contradicting one other and pointed out that many financial service providers were being visited by different supervisors because there had been no final agreement on the remits of different European or local authorities. “We are only at the beginning, but I hope we will realise how many redundancies are already being created by too much regulation and that it is killing some financial products like the Riester-Rente,” Websersinke added.
Regarding a possible financial transaction tax, Schelling said he did not see a sufficient number of EU member states supporting the measure. “Further, it is unclear whether it is actually legally possible to introduce such a tax in only a few member states against the will of the other EU members,” he said.
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