AIX-EN-PROVENCE, France (Reuters) - Strengthening regulation of financial markets is necessary to reduce risks, ECB policymaker Christian Noyer said on Saturday, in a speech entitled “The end of the dictatorship of finance”.
Noyer, who has in the past turned up the heat on London’s role as Europe’s finance hub, criticized accounting rules which he said fuelled “short-termism” and said the opaque nature of some parts of the markets had fuelled the financial crisis.
“Self-regulation does not work, especially because of imperfections of some financial markets which are neither transparent nor efficient,” Noyer, the head of the French central bank, told an economists’ conference in the south of France.
Innovation is needed, he said. “But taking into account the nuisance potential of this industry, innovation must be controlled,” he told the panel.
Regulators would aim to strengthen the resilience of banks, reduce opaqueness and systemic risks and fight “casino-finance”, he said, adding that the objective was not to “suffocate banks”.
In April, Noyer criticized London, which is fighting a European Central Bank plan to require clearing houses that handle a substantial amount of euro-denominated derivatives trades to be located in the euro zone.
The focus on providing back-up for derivatives trades is part of efforts to make these products safer after the financial crisis, when the near-collapse of U.S. insurer AIG exposed the risks of the opaque derivatives markets.
Noyer, who did not discuss the ECB’s monetary policy, said: “In most crisis episodes in the euro zone since 2009, markets have had reactions that have often been brutal and extreme.”
He added, however, that none of this should be an excuse for governments not to clean up their finances.
Reporting by Ingrid Melander; Editing by Alison Williams