ECB’s Weber Says Authorities Must Further Toughen Banking Rules

European Central Bank council member Axel Weber said global authorities must take further measures to make the financial system more resilient against future crises, including the orderly unwinding of a bank if necessary.

The so-called Basel III rules are a “decisive step forward,” Weber, who also heads Germany’s Bundesbank, said at a conference in Frankfurt today. “But further steps are necessary to reach the goal of making the financial system more resilient” and it’s “neither possible nor desirable to totally exclude the failure of an individual bank” under a new framework.

The Group of 20 nations have decided to bolster banks’ liquidity and capital buffers to prevent a repeat of the financial crisis that led to the collapse of New York-based Lehman Brothers Holdings Inc. Weber said he doesn’t expect higher capital buffers to hurt growth and that some concerns “seem excessive.”

Weber’s remarks come after Michel Barnier, the European Union’s financial-services chief, said today that the 27-member region may alter proposed new capital and liquidity rules if needed. Regulators won’t take steps that “hinder economic recovery,” he said at a conference in Brussels today.

It’s “unarguable that we need to take measures in order to guarantee global financial stability in the future,” Weber said. “More stable banks are the first line of defense against any systemic crisis.”

Weber also said that he has “nothing to add” to today’s remarks by ECB President Jean-Claude Trichet during a press conference in Frankfurt. A stable financial system is “indispensable” for an “efficient monetary policy,” he said.

To contact the reporters on this story: Simone Meier in Frankfurt at smeier@bloomberg.net; Christian Vits in Frankfurt at cvits@bloomberg.net.

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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