Association of German Banks’ President Fitschen: no prosperity at the expense of the next generations25 November 2013 -
The Association of German Banks’ President, Jürgen Fitschen, stressed today how important solid public finances and sound welfare systems were. “We can only spend the money we earn. Today’s prosperity mustn’t be at the expense of future generations. The new German government, too, should continue to work on consolidating the federal budget. And there shouldn’t be any backdoor tax increases that are a drag on the economy. When it comes to reforms and public finances, Germany is a role model for the rest of Europe”, Mr Fitschen said, looking at the ongoing coalition talks in Berlin. The President of the Association of German Banks and Co-Chief Executive Officer of Deutsche Bank AG was, however, confident that the prospective coalition partners were aware of this responsibility.
Level-headed approach to financial market regulation needed
Mr Fitschen underlined that, as far as regulation was concerned, policymakers had done a lot right over the last few years. “Re-regulation of the financial sector was necessary after the financial crisis.” Five years on from the collapse of Lehman Brothers, the regulatory landscape for banks was now a more or less totally different one, with tighter capital and transparency requirements and stricter remuneration rules, for example. Even if not all projects had been completed yet, much was moving in the right direction.
The recent past had posed great challenges for regulators, policymakers and banks, however. In many areas, new ground had been broken. While the financial system was now more stable overall, the rulebook had become so complicated that even experts had trouble understanding it today. “The large number of regulatory measures and their complexity threaten to overburden many – especially small – banks”, Mr Fitschen feared. Adverse economic consequences could no longer be ruled out either.
Harmful effects on the economy not ruled out
Mr Fitschen called for first reviewing the effectiveness and consistency of existing regulation in practice before considering any further measures. “Like with any good medicine, regulation is also about administering the right dose. Too much medicine often doesn’t help, but can do more damage than good”, he remarked.
“Sensible regulation should address the roots of the crisis”, Mr Fitschen added. Measures such as the planned leverage ratio or structural reform of the banking sector ignored this perception, however. They had no influence on financial market stability and were bad for the economy as a whole.
Many details of the comprehensive assessment still open
Mr Fitschen welcomed it that European banking supervision would be taken over by the European Central Bank (ECB). The health check on banks (comprehensive assessment) beforehand was burdensome, but essential to avoid saddling the new supervisory authority with any legacy debt.
Many details of this health check were still open – take the stress test completing it or the exact timetable, for example. “These details should be sorted out as soon as possible,”
Mr Fitschen said“, as the comprehensive assessment is a major challenge for banks, particularly with the necessary personnel resources in mind.”
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