DAVOS, Switzerland (Reuters) - Following are highlights from the Redesigning Financial Regulation panel at the World Economic Forum in the Swiss resort of Davos on Saturday.
JEAN-CLAUDE TRICHET, PRESIDENT, EUROPEAN CENTRAL BANK “We’re bound to improve considerably regulation. We’re bound to make the financial system much more resilient than before because we cannot afford to have a financial system as fragile as before.
“The fact that we must have global rules is absolutely essential.
“If failures appear avoidable, we need living wills or resolution then we have enormous work to do as regards to cross border institutions. We have to strengthen infrastructure in order to minimize the fallout of a collapse. It is very complex and multi-dimensional and we have to work a lot.”
“The case of Europe is particular one — we have a single market, the European Union, and national supervision. A large set of reforms is underway in Europe which would permit to have much better coordination among supervisors than existed before. It’s the first lesson drawn from the crisis on an institutional level.”
“The question for me is whether constituencies that are large banks have sufficiently reflected upon their business models, mindsets in order to ... proactively lead their businesses to new business models. Are we hoping after the crisis, we can go back to the old normal?”
“Regulation for what? Regulation is to repair the past and marginally improve the past, and we don’t think we’re doing ourselves much good. All banks are not the same. In formulating new regulations, in may developing countries it wasn’t a financial system crisis. Ordinary people faced the impact of failures of financial system.”
“Capital requirement is related to risk taking. We have not been successful in clearly associating capital requirement with risks undertaken by financial institutions.”
“On the issue of size we have an undoubted conclusion the bigger they are more difficult to deal with. One can imagine firm limits on their size, I tend to prefer differential in capital ratios. Too big to fail is not the right issue. We’re looking for a resolution mechanism.”
“There’s a clear desire for uniformity of regulation across borders, it cannot be identical as each market is different but certainly uniformity of approach.”
“(The FSB) has done a great deal of excellent analytical work produced many recommendations that are important. Now we see these put into practice. There’s a delicate balance between getting coordination and getting measures put in place.”
“It’s clear in the U.S. some of the problems originated in areas which had no supervisory at all. In terms of ... whether the structure of supervisory system in the U.S. is being improved and modernized, it seems to me in the U.S. case more rapid progress is desirable to close all the gaps that exist in the current system.”
“My company is active in the UK and the US and 30 different countries. What we want is consistency. ... We don’t want to be exposed to regulatory arbitrage.”
“Regulatory arbitrage is very damaging for us.” “It’s important that companies are allowed to fail. We think good companies should be able to push out bad companies.”