Financial Regulatory Forum

ECB’s Orphanides: cenbanks need bigger reg role

September 25, 2009

ECB Governing Council member and Cyprus Central Bank Governor Athanasios Orphanides speaks in an interview with Reuters in Nicosia June 23, 2008. Picture taken June 23, 2008.  REUTERS/Andreas Manolis (CYPRUS)   By Ros Krasny
   CHICAGO, Sept 25 (Reuters) – Reforms that come out of the recent financial crisis should include enhancing the role of central banks in supervising financial firms, a top European Central Bank policy-maker said on Friday.
   Like other speakers at the two-day Chicago Federal Reserve/World Bank conference, European Central Bank governing council member Athanasios Orphanides warned against complacency in the drive toward meaningful regulatory changes.
   “The emerging signs of recovery are welcome, though unusually high uncertainty persists,” Orphanides said. “Although we have avoided the worst, difficult challenges still lie ahead.”
   Orphanides, governor of the Central Bank of Cyprus, did not comment on the economic outlook in his prepared remarks.
   He said regulators and supervisors should be ashamed by the crisis of the global regulatory framework that helped to trigger a severe global recession.
   “The fact that supposedly well regulated financial institutions have been the major source of problems is an embarrassment for the international community of regulators and supervisors,” Orphanides said.
   Looking ahead, the level of cooperation among global central banks makes them well placed to take on a bigger role in regulation — which will tend in the future to be more focused on broad, systemic risks.
   “Supervision of systemically important institutions by the central banks would enhance stability in the international financial system.”
   Orphanides urged a return to simpler rules from more refined and complex regulatory frameworks.
   Simple rules such as leverage or liquidity ratios can help make the financial system more stable, even if they “appear overly restrictive to bank managers who … might wish to push the envelope of their activities,” he said.
   The policy-maker also stressed the need for a harmonized regulatory framework across regions and markets to avoid “regulatory arbitrage” by market participants shopping for the most permissive regime.
   (Editing by Andrew Hay)
   ((Ros.Krasny@thomsonreuters.com; Tel: +1 312 408 8592; Reuters Messaging: ros.krasny.reuters.com@reuters.net)) Keywords: ECB/ORPHANIDES 
  
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 Friday, 25 September 2009 16:58:52RTRS [nN25138655] {EN}ENDS

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