ECB: Financial stability needs focus on regulation

JACKSON HOLE, Wyoming (Reuters) - European Central Bank officials on Friday underscored the importance of regulatory oversight alongside interest rates decisions as part of maintaining financial stability.

"We should not, at this stage, look only at monetary policy but keep the regulatory side firmly in focus," European Central Bank Governing Council member Axel Weber said in comments at the Kansas City Federal Reserve Bank's annual monetary policy conference.

Weber said recent financial turmoil has had the effect of making capital requirements punitive rather than preventive as assets lose value.

ECB President Jean-Claude Trichet made a similar point in responding to a paper that argued that U.S. Fed policy-makers should not draw too great a distinction between interest rate moves and other steps aimed at boosting financial stability.

"Our concept of monetary policy is based on two pillars, and there is a very, very deep analysis of the monetary situation," Trichet said, who also commented from the audience.

In the paper, economists Tobias Adrian and Hyun Song Shin said the Fed's actions on short-term rates and on financial stability are "two sides of the same coin."

(Reporting by Mark Felsenthal; Editing by Chizu Nomiyama)