Bank of Spain: Financial crisis in Europe changed role of central banks
Azerbaijan, Baku, March 6. / Trend A. Akhundov /
One way of structuring reforms in the banking sector in Europe is to separate risky trading activities from other banking operations through the creation of a special structure.
This was stated by Central Bank of Spain Governor Luis Maria Linde during his speech at the Fourth Future of Banking Summit in Paris. The summit was organised by The Economist Conferences and sponsored by Azerbaijani PashaBank.
"Two divisions, a retail bank and a trading bank may form a part of the single banking group, while maintaining the model of the universal bank," Linde said.
According to him, the crisis required a regulator response which was reflected in strengthening capital requirements to its level and quality. The crisis has also highlighted the need to provide a macro-prudential perspective in financial regulation, introduce a new leverage ratio and other measures.
"While the capital requirements under Basel III will apply in stages up to 2019, in some cases, markets and regulators accelerate this process. European banks are mostly showing the Sommon Equity Tier 1 at up to nine per cent. The banks achieved this not only by raising capital in the markets, but also through gaining credits and de-leveraging. This raises concerns about the impact that this regulatory 'overhaul' may have on the growth of the sector," Linda said.
According to him, in such circumstances the role of the central banks in various countries is changing.
"Central banks have played a critical role during and after the financial crisis of 2007-2008. Use of innovative instruments was crucial in the control of the deterioration in the financial markets and the economic downturn which was faced by the world in early 2009. This meant the central banks moved away from the old model of monetary policy. Tendencies for central bank policies in two main areas, monetary and macro prudential are strengthening to ensure a more sustainable financial stability," Linde said.