FRANKFURT (Reuters) - The global banking sector needs to be well regulated and measures already decided should not be rolled back, European Central Bank President Mario Draghi said on Friday as concerns grow that the new U.S. administration would ease bank rules.
Bank regulation needs to enter a period of stability and there is no need to redesign the rules, Draghi told a conference, arguing that excessive deregulation was the chief cause of the global financial crisis.
Donald Trump’s presidential election win has increased hopes by some and concerns by others that many of the bank sector rules rolled out in the past decade would be scrapped, giving banks more breathing space but potentially increasing systemic risks.
“The focus should be on implementation, not on new design,” Draghi said. “Regulatory measures should be implemented in a balanced way that ensures a level playing-field globally.
“And while marginal adjustments are possible, there should be no rolling back on what has been decided,” said Draghi, whose bank supervises the euro zone’s biggest banks.
Re-regulation has led to improved bank solvency and asset quality, also helping Europe start is drive to reduce non performing loan levels.
A new wave of bank rules known as Basel III is due to be finalised in January and come into force in 2019 after years of hard fought negotiations.
Having unveiled unprecedented stimulus over the past several years, Draghi said his policy focus is now on whether a recovery in euro zone inflation can sustain itself even if the ECB’s exceptional monetary stimulus is reduced.
“Going forward, our assessment will depend on whether we see a sustained adjustment in the path of inflation towards that objective,” Draghi told a conference in Frankfurt.
“And that means that inflation convergence towards 2 percent is durable, even with a reduction in monetary accommodation. Inflation dynamics, in other words, need to be self-sustained.”
Inflation is expected to rise over 1 percent early next year after flirting with deflation for year. But that is still well short of the ECB’s close to 2 percent target.
Reporting By Francesco Canepa and Balazs Koranyi