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The case of Bear Stearns created a new doctrine, German BaFin President Jürgen Sanio said. The anticipation that key players in the financial system can be bolstered has had a smoothing impact on the market, he said. Market participants now have no doubt that even big bail-outs are possible in the very short term. However, this does not mean that banks have to be bailed-out due to their sheer size and market share, he underlined with a view to possible moral hazard problems.
On the brink of a disaster it was better to cure, Sanio said. Now, however, it is time to turn to prevention and learn the right lessons from the crises. The proposals made by the FSF should be taken seriously, he warned. The 67 FSF-recommendations are more than just a “wish-list”.
Sanio strongly opposed the recent calls to simplify regulation. “There certainly are many answers to all the difficult questions within a complex international financial system”, he said. “They are perfectly wonderful and elegant – but unfortunately wrong.”