November 8, 2011 / 4:07 PM / in 8 years

HIGHLIGHTS-Hildebrand warns of devastating crisis forces

BERLIN, Nov 8 (Reuters) - Below are highlights of comments made at a conference to mark the first anniversary on the Europe’s new financial super-watchdog the European Systemic Risk Board.

Swiss National Bank President Philipp Hildebrand, Riksbank Governor Stefan Ingves, Bundesbank President Jens Weidmann and ECB Executive Board member Juergen Stark are all due to speak at the event.


“With respect to monetary policy, there is the substantial risk that involvement in crisis resolution may entail a burden shifting from fiscal to monetary policy, and the ultimately necessary political action to address the root cause of the crisis might be delayed, incomplete, or not happening at all.”

“Governments may have a short-sighted incentive to use monetary policy to finance public debt, despite the substantial risk it entails. It undermines the incentives for sound public finances, creates appetite for ever more of that sweet poison and harms the credibility of the central bank in its quest for price stability.”


“Proposals to involve the Eurosystem in leveraging the EFSF - be it through a refinancing of the EFSF by the central bank or most recently via the use of currency reserves as collateral for an SPV buying government bonds - would be a clear violation of this prohibition.”

“The current crisis cannot be solved by destroying its stability oriented basis. Hence, I am glad that also the German government echoed our resistance to the use of German currency or gold reserves in funding financial assistance to other EMU members.”


“So far, the decisions taken for crisis resolution within the monetary union have not addressed these issues sufficiently as the recent aggravation of the crisis has shown.”

“The euro area is currently caught up in the fact that its framework has, in the course of the crisis, increasingly lost consistency. This is harming the credibility of the current rescue packages.”

“While risks stemming from undesirable and self-inflicted developments in individual countries have been increasingly communalised by the assistance packages, the ultimate decision-making power has remained on the national level and the conditionality that was intended to rein in national policymakers has been increasingly relaxed.”


“The ongoing financial crisis has unleashed devastating forces and we are in the midst, in many ways, of these forces.”

“The crisis has also brought clarity about some fundamental flaws in the financial system as it existed, or as it evolved, heading into the crisis. It is our responsibility, as policymakers, to work relentlessly and with full determination to address these flaws and strengthen the system’s resilience for the future.”


“A clear lesson, one of the most powerful lessons from the crisis is that monetary policy that ensures price stability is a key ingredient for macro economic stability but it does not necessarily avoid the build up of excesses in the economies... it does not guarantee financial stability.”


“The most prominent area of regulation that we have in mind is that it should be the SNB’s responsibility to mandate a counter cyclical capital buffer as it has been set up in Basel III.”

“We feel that we should have a more formal role to play on deciding on regulation that clearly impacts on financial stability. We are not suggesting that we have to have a voice in all regulation, but in the regulation that will have a direct bearing on financial stability.”


“There is need for coordinated action by EU supervisors to strengthen the capital of banks.”

“There is a need for a transparent and consistent valuation of sovereign exposures.”

“There is a need for speedy implementation of the July 21 measures to address the risks of contagion... and there is also a need to be co-ordinated and a need to be consistent when it comes to creating policy by all policymakers involved.” (Reporting by Marc Jones and Veronica Ek; editing by Ron Askew)

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