ECB Trichet calls for closer co-operation between supervisors and central banks

02 July 2008

Closer co-operation would integrate supervisors’ micro-prudential functions and central banks’ macro-prudential functions in the assessment of possible financial risks and vulnerabilities, ECB President Trichet said.

While financial integration is first and foremost a market-driven process, authorities can play an important supportive role in a number of ways, for instance by acting as catalysts for private sector initiatives and by reducing policy-related obstacles to cross-border finance, ECB President Trichet said at the Paris Europlace Financial Forum.

 

The three main priorities for the public authorities are to further enhance the EU institutional setting for financial regulation and supervision, to remove obstacles to cross-border securities clearing and settlement, and to enhance the EU regulatory framework and market infrastructure for retail banking, he outlined.

 

To cope with the current financial turmoil, the key priority is to ensure the expeditious and effective implementation of the respective recommendations set out in the FSF report, he said. “The competent national, regional and international authorities and bodies will need to make every possible effort to ensure adequate progress”, he said. “This relates especially to those actions which were agreed to be implemented within 100 days or by the end of this year.”

 

Trichet advocated to further enhance institutional arrangements for cross-border co-operation among authorities and fully supports the FSF’s proposal to set up colleges of supervisory authorities for the largest globally active institutions by the end of this year.

 

To ensure effective functioning of supervisory colleges in Europe an adequate involvement of all relevant host authorities is required, he said. This includes “a co-ordinating role for the home country supervisor, with due respect to the responsibilities of host authorities; and arrangements – to be devised by the EU committees of supervisors established under the Lamfalussy approach – to foster consistent procedures and policies across different supervisory colleges.”

 

However, closer ongoing co-operation should be pursued not only between supervisors, but also between supervisors and central banks, Trichet demands. “This would integrate supervisors’ micro-prudential functions and central banks’ macro-prudential functions in the assessment of possible financial risks and vulnerabilities. Furthermore, given the growing role of correspondent and custodian banks in payment and settlement systems, closer co-operation between supervisors and central banks, in their role as overseers, is increasingly important to ensure a comprehensive and consistent treatment of the respective financial risks.”

 

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