Financial Regulatory Forum

By Sakari Suoninen

FRANKFURT, June 23 (Reuters) – Central banks are searching for tools to carry out new responsibilities for tackling asset bubbles at an early stage and are looking at regulatory measures to prevent future financial crises.

Dynamic provisioning of loan losses could become the next buzz phrase while money supply and lending data look set to get more scrutiny. But one weapon missing from the armoury is interest-rate policy, which central bankers think is best reserved for combating any threat of inflation.

Central banks want to use their new regulatory powers to safeguard financial stability and will be especially mindful of the risks posed to this by spiralling asset prices, above all when financed with debt.

“The instrument best suited to maintain financial stability is macroprudential regulation,” Vittorio Corbo, a former Governor of the Central Bank of Chile, said in a research paper.

“(It) should have a dual purpose: Reduce the incentives for financial institutions to increase leverage during a boom, and make the financial system more robust during a bust.”

By Christian Gutlederer and Peter Maushagen

VIENNA/MUNICH, Dec 14 (Reuters) – Austria nationalised Hypo Group Alpe Adria on Monday to avoid a collapse that could have undermined trust in banks in eastern Europe and cast doubt over Austria’s and Germany’s backing of state-owned lenders.

Austria is taking full control of the ailing bank after a high-stakes gamble over the weekend that soured German-Austrian relations and required interventions by the presidents of the European Central Bank and the Bundesbank to be resolved.

German state bank BayernLB, Austrian insurer Grawe and the Austrian region of Carinthia are to give away their stakes for a nominal amount, while injecting around 1 billion euros ($1.5 billion) of capital, Finance Minister Josef Proell said.