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08 December 2008

Trichet - supervision of cross-border financial institutions needs to be enhanced


The risk management systems have to be improved, the ECB President said. The compulsory establishment of colleges of supervisors for all cross-border banks are particularly important, he said.

ECB President Trichet outlined five points of particular importance to make the financial system more resilient in the future. The risk management systems in all areas including in securitisation or liquidity risk has to be improved, he said and welcomed the current revision of the Capital Requirements Directive.

 

The compulsory establishment of colleges of supervisors for all cross-border banks are particularly important, he said. “As regards the future I am sure that substantial improvements could be envisaged, in particular by the High-Level Group set up by the Commission and which is gathering eminent personalities.”

 

Further issues include to avoid excessive short-termism, including specific guidance by supervisors on internal compensation schemes. Enhanced transparency ‘in all respects’ and in ‘all financial institutions’ is also critical. In particular, Trichet welcomed the establishment of a central counterparty clearing for the CDS markets. Finally, potential procyclical effects have to be prevented which includes those effects resulting frem prudential rules and accounting standards.

 

Full speech

 



© ECB - European Central Bank


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