Legislative proposals should fully reflect ongoing work at international and EU level aimed at enhancing the resilience of the financial system and protect consumers and investors against the impact of excessive risk taking.
Concerning the legislative reform on financial markets, Mr Trichet presented the following main points:
• Future regulatory reform will aim at improving the level and quality of capital for credit institutions, as well as developing a framework for liquidity risk. The quality of capital, especially the so called Tier-1 capital which is of utmost importance for loss-absorption on going concern and crisis situations, will significantly improve.
• Legislative reform needs to address the moral hazard stemming from systemically important financial institutions. In a resilient financial system it cannot and should not be taken for granted that authorities will always come to the rescue.
• There is a need to review resolution regimes and bankruptcy laws in light of recent experience to ensure an orderly winding-down of systemic cross-border financial institutions. In this respect the legislative work planned by the Commission is very important.
• Concerning macro-prudential supervision, one of the key lessons stemming from the financial crisis relates to the importance of understanding and assessing the degree of “interconnectedness” between market participants.
• Financial stability monitoring in the EU as a whole will provide significant analytical and informational challenges. A large part of the effectiveness of the ESRB will rely on the quality and solidity of the analysis and information underlying its financial stability assessments.
• The next few years will be crucial in terms of building up a strong, competitive and less leveraged financial system which will be subject to proper regulation and supervision, both at micro and macro prudential level. Europe should play a leading role in these developments. The panel discussion could help identify the most pressing priorities.
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