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Orphanides wants tighter regulation of financial markets

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EZB-Foto_orphanides BRATISLAVA (Dow Jones) – The global financial crisis highlights the opinion of a member of the Council of the European Central Bank ( ECB ) the need for greater regulation of the markets. (Photo : ECB )

Moreover, the crisis shows that central banks should in addition to the maintenance of price stability also in securing the financial markets play a role , "said Athanasios Orphanides , Governor of the Reserve Bank of Cyprus, on Monday in Bratislava.
" Currently there are no common European approach for early intervention if a financial institution gets into difficulties. The lack of a common mechanism sets the wrong incentives for bank management in crisis situations, " said Orphanides .
What is needed therefore are stronger regulatory tools , which could intervene early with the supervisors in order to prevent the failure of a financial institution or mitigate its effects . The credible threat of political intervention serves as an incentive for financial institutions to secure their own funding , thereby reducing the systemic risk.
"The crisis has led us also remember that central banks can play in stabilizing the financial markets play an important role. It showed also that the mandate to maintain price stability is not sufficient to ensure financial stability, " said Orphanides further. Central banks would have to be equipped in order to secure the financial help with the tools , "added the ECB Council member .

– By Leos Rousek , Dow Jones Newswires
+49 ( 0 ) 69 29 725 300, konjunktur.de @ dowjones.com
(Sean Carney in Prague contributed to this article)

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