Euro­pean Cen­tral Bank need to help pre­vent bub­bles

The Pak Banker - - Front Page -

HELSINKI: Euro­pean Cen­tral Bank (ECB) Gov­ern­ing Coun­cil mem­ber Erkki Li­ika­nen said cen­tral banks should play a key role in pre­vent­ing fi­nan­cial mar­ket bub­bles and joined the cho­rus of pol­i­cy­mak­ers call­ing for an am­bi­tious ap­proach to debt rules.

"Au­thor­i­ties have not had ad­e­quate means for in­ter­ven­ing in the ex­ces­sive rise in as­set prices, lend­ing and the ex­ces­sive growth in in­debt­ed­ness," Li­ika­nen said in a state­ment linked to the Bank of Fin­land's quar­terly re­port on Wed­nes­day.

"Cen­tral banks should play a cen­tral role in putting into use mea­sures whose ef­fect is in calm­ing ex­ces­sive lend­ing and in­debt­ed­ness, so called macro-pru­den­tial poli­cies."

The re­cent cri­sis has shown that there are mas­sive risks as­so­ci­ated with an un­con­trolled rise in as­set prices, he said. He also joined the cho­rus of ECB pol­i­cy­mak­ers urg­ing Euro­pean politi­cians to toughen up new debt rules. "High lev­els of in­debt­ed­ness along with a weak­ened com­pet­i­tive­ness have sapped the mar­kets' con­fi­dence in many coun­tries' abil­ity to ser­vice their debts." "When re­form­ing the gov­er­nance of eco­nomic poli­cies, it is im­por­tant that the EU and its mem­ber states are suit­ably am­bi­tious," he said.

Li­ika­nen added that low in­fla­tion­ary pres­sures and in­fla­tion ex­pec­ta­tions in line with the the ECB's price sta­bil­ity ob­jec­tive, had en­abled the bank to keep mon­e­tary pol­icy ac­com­moda­tive. He also re­peated that the ECB de­cided last week to pro­long its cri­sis-era tac­tic of lend­ing banks all the 1-week, 1month and 3-month fund­ing they request, up un­til at least mid April. The "bank­ing sys­tem's liq­uid­ity de­mand has been fully met and this pol­icy will con­tinue to be prac­ticed un­til at the least the end of the first quar­ter of the com­ing year," Li­ika­nen said. -PB News

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