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“The prime responsibility to foster a financial system lies with financial institutions themselves”, ECB Board Member Tumpel-Gugerell said, “but it seems that regulatory measures are needed too.”
Outlining the challenges for financial institutions she noted that better disclosure of risks, as well as accounting and risk management practices, is of the essence in the short term.
She criticised the banks liquidity management practices and the current techniques in the valuation of complex structured credit products and called on the market to enhance valuation processes.
Finally, she called on the institutions to live up to their social responsibility. “Socially responsible behaviour is key to creating sustainable value for all stakeholders”, she said. “Pressure for short-term results may have a negative effect on incentives”, she underlined. “This is particularly relevant in a market characterised by information asymmetries.”