Speaking at a seminar at the European Economic and Financial Centre in London, Tumpel-Gugerell said that the key challenge for policy-makers will be to design appropriate measures to enhance the stability of the financial system without imposing restrictions that would unnecessarily hamper financial innovation and reduce the efficiency of the system.
At the micro-prudential level, she said that several initiatives are under way to create more effective supervisory regulation, taking into account the lessons learnt from the crisis. The proposals of the Basel Committee – which are known as ‘Basel III’ – aim to enhance capital and liquidity regulation to improve loss absorption capacity, mitigate pro-cyclicality and increase resilience to shocks. These measures – when phased in gradually as the economy recovers – will contribute to long-term economic growth, not least by helping prevent the high costs of a crisis such as we are currently experiencing.
She concluded by saying that ’ultimately, central banks cannot act alone, particularly in a monetary union. Actions are required to address all issues and challenges, and to spur long-term economic growth. We all have to work together. National governments, regulators and supervisors, as well as the private sector and the financial industry have to proceed with the difficult, but vital, measures required to ensure sustainable and sound economic growth and the stability of our financial system.’
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