Europe’s central bankers go from death to dancing

October 21, 2009

It may be strictly coincidence but as TV stations are rolling out their latest batch of ballroom shows, Europe’s central bankers appear to have caught the dancing bug.

The Bank of England’s Mervyn King and the European Central Bank’s Lorenzo Bini Smaghi, two of central banking’s more colourful characters, both appear to have it on the brain.

Last week in a speechat Siena University nestled in Italy’s Tuscan hills, ECB board member Bini Smaghi said many bank CEOs in the pre-crisis days were dancing in a suicidal game of musical chairs, allowing their banks to follow the disastrous path of packaging up and buying toxic debt parcels, hoping that a chair would still be left when the music stopped and the stampede for seats begun. He called for a responsible adult to be in charge of the music in future.

On Tuesday evening King was quick-stepping to a similar tune,  ”Parallel to the long-established role which monetary policy plays in taking away the punch bowl just as the party gets going, so there is a role for the central bank to use macro-prudential policy instruments for financial stability purposes by turning down the music just as the dancing gets a little too wild,” King said.

King and Bini Smaghi have been dance partners before, although they were both a little more macabre back then. 

In June, King complained that without regulatory teeth, his institution was limited to issuing sermons or organising the burials of the UK’s dead commercial banks. Shortly after Bini Smaghi likened the ECB’s new regulatory offspring the European Systemic Risk Board to a doctor unable to force a sick patient to take the necessary medicine.

But on the bright side the switch from death to dancing may provide a telling incite into the change of mood among central bankers over recent months.

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