Bavarian Financial Summit demands higher quality of regulation
06. Nov 2009 by Finanzplatz München Initiative
Which regulations are capable of preventing crises on financial markets was the main topic of the Third Bavarian Financial Summit. The daylong event was staged by the Bavarian Finance Center (BFC) and was attended by more than 300 of the state financial industry’s leaders.
The introductory remarks made by Martin Zeil, Bavaria’s economics minister, served as a keynote for a number of the Summit’s other speakers: “We need stricter regulations. This strictness has to be informed, however, by the sense of the objectives we are striving to attain and has to be commensurate to them,” he demanded. Zeil came out against an undifferentiated beefing up of supervisory regulations. Another point made by the minister: the time is now at hand to quickly implement the resolutions made on the international level as to the better regulation of financial markets. As Zeil noted: “This window of opportunity is finite.”
The minister hailed the plans made by Germany’s new government to transfer the responsibility for bank supervision from BaFin (Germany’s Financial Markets Supervision Agency) to the Bundesbank. As he pointed out, by doing such, Germany’s government had adopted a proposal made by Zeil a year ago. This proposal had also been advanced by fpmi in a position paper published shortly after Germany’s federal election on September 27th of this year.
A number of participants in the Bavarian Financial Summit made the point that the know-how possessed by financial market supervisors and by other regulatory authorities has to be beefed up. “We need regulatory authorities whose work is better than it was in the past,” stressed Theodor Weimer, Speaker of the Executive Board of HypoVereinsbank. “Better work means better pay for them,” he added. A key thrust should be “preventing arbitrage between supervisory systems.” Weimer called upon the responsible body to create regulations of truly global reach and to “not get stuck in local nitpicking”.
Weimar took a highly critical look at the recent developments on the world’s financial markets. The main problem is an excess of liquidity. This has enabled the banks to reap large-sized profits. This liquidity has, however, led to the decoupling of the financial sector from the real world economy. The failure to take counter-measures “would give rise to the peril of a slow and very steady rise of a new bubble.”
“No centralized mega-supervisory authority”
Michael Kemmer, the Chairman of the Executive Board of BayernLB, came out in favor of a regional-based approach to bank supervision. Such supervisory authorities have to be made capable of working together on the transnational basis. This should be accompanied by a refraining from having national banking systems being controlled by gigantic centralized authorities responsible for supervising the entire EU or world, stated Kemmer. Lawmakers should also not indulge in quick fixes. Rather, they should come up with a carefully crafted schedule of promulgation of regulations. “The world economy is deep in the doldrums. I believe this is therefore not the time to undertake a far-reaching stiffening of regulations. Such beefings-up require in any case periods of transition,” noted Kemmer. These should be preceded by the systematic carrying out of fundamental cost-benefit analyses on how such adjustments would affect the financial industry and the economy as a whole.
In further remarks, Kemmer stressed that the pending restructuring of the bank supervisory system could well give rise to an absence of control. “This time of difficulties mandates having a system of bank supervision which is capable of taking requisite measures at any time. This system can not restrict its efforts to repairing itself.” The chairman of the executive board of Bayern LB also called upon banks to do their share. “Producing a financial industry which is capable of functioning on a sustainably solvent and profitable basis is not solely the responsibility of the system supervising it. In fact, the main responsibility rests with us, the players on the market,” he pointed out.
No transfer of responsibility for the supervision of the insurance industry to the Bundesbank
Rolf-Peter Hoenen, the president of Germany’s Association of the Insurance Industry (GDV) joined in calling for a boosting of the quality of supervision. Hoenen doesn’t see any reason to transfer the responsibility for the supervision of the insurance industry to the Bundesbank, as is now being discussed. “This transfer would give rise to the peril of the “responsibility for the supervision of the insurance industry becoming an appurtenance of the banking supervision system “, stated Hoenen. As he noted, insurers pursue business models which differ from those of banks in that the former are designed to achieve results sustainable over the long term. This difference means that the supervision of insurers cannot be accomplished through the employment of the rules applied to banks, Hoenen stressed.
Rules for central banks and for politicians drawing up budgets
Wolfgang Gerke, one of the BFC’s presidents and thus one of the Bavarian Financial Summit’s organizers, cast a critical eye on both the private financial industry and on the public sector, and, specifically in the latter on central banks and on the politicians drawing up budgets. These were the real causers of the financial crisis, maintained Gerke, who went on to make the accompanying criticism that the countries participating in Pittsburgh’s G-20-summit failed to set policies shaping their fiscal and monetary policies.
Further Information
> Video Statements on the third Bavarian Financial Summit
The introductory remarks made by Martin Zeil, Bavaria’s economics minister, served as a keynote for a number of the Summit’s other speakers: “We need stricter regulations. This strictness has to be informed, however, by the sense of the objectives we are striving to attain and has to be commensurate to them,” he demanded. Zeil came out against an undifferentiated beefing up of supervisory regulations. Another point made by the minister: the time is now at hand to quickly implement the resolutions made on the international level as to the better regulation of financial markets. As Zeil noted: “This window of opportunity is finite.”
The minister hailed the plans made by Germany’s new government to transfer the responsibility for bank supervision from BaFin (Germany’s Financial Markets Supervision Agency) to the Bundesbank. As he pointed out, by doing such, Germany’s government had adopted a proposal made by Zeil a year ago. This proposal had also been advanced by fpmi in a position paper published shortly after Germany’s federal election on September 27th of this year.
A number of participants in the Bavarian Financial Summit made the point that the know-how possessed by financial market supervisors and by other regulatory authorities has to be beefed up. “We need regulatory authorities whose work is better than it was in the past,” stressed Theodor Weimer, Speaker of the Executive Board of HypoVereinsbank. “Better work means better pay for them,” he added. A key thrust should be “preventing arbitrage between supervisory systems.” Weimer called upon the responsible body to create regulations of truly global reach and to “not get stuck in local nitpicking”.
Weimar took a highly critical look at the recent developments on the world’s financial markets. The main problem is an excess of liquidity. This has enabled the banks to reap large-sized profits. This liquidity has, however, led to the decoupling of the financial sector from the real world economy. The failure to take counter-measures “would give rise to the peril of a slow and very steady rise of a new bubble.”
“No centralized mega-supervisory authority”
Michael Kemmer, the Chairman of the Executive Board of BayernLB, came out in favor of a regional-based approach to bank supervision. Such supervisory authorities have to be made capable of working together on the transnational basis. This should be accompanied by a refraining from having national banking systems being controlled by gigantic centralized authorities responsible for supervising the entire EU or world, stated Kemmer. Lawmakers should also not indulge in quick fixes. Rather, they should come up with a carefully crafted schedule of promulgation of regulations. “The world economy is deep in the doldrums. I believe this is therefore not the time to undertake a far-reaching stiffening of regulations. Such beefings-up require in any case periods of transition,” noted Kemmer. These should be preceded by the systematic carrying out of fundamental cost-benefit analyses on how such adjustments would affect the financial industry and the economy as a whole.
In further remarks, Kemmer stressed that the pending restructuring of the bank supervisory system could well give rise to an absence of control. “This time of difficulties mandates having a system of bank supervision which is capable of taking requisite measures at any time. This system can not restrict its efforts to repairing itself.” The chairman of the executive board of Bayern LB also called upon banks to do their share. “Producing a financial industry which is capable of functioning on a sustainably solvent and profitable basis is not solely the responsibility of the system supervising it. In fact, the main responsibility rests with us, the players on the market,” he pointed out.
No transfer of responsibility for the supervision of the insurance industry to the Bundesbank
Rolf-Peter Hoenen, the president of Germany’s Association of the Insurance Industry (GDV) joined in calling for a boosting of the quality of supervision. Hoenen doesn’t see any reason to transfer the responsibility for the supervision of the insurance industry to the Bundesbank, as is now being discussed. “This transfer would give rise to the peril of the “responsibility for the supervision of the insurance industry becoming an appurtenance of the banking supervision system “, stated Hoenen. As he noted, insurers pursue business models which differ from those of banks in that the former are designed to achieve results sustainable over the long term. This difference means that the supervision of insurers cannot be accomplished through the employment of the rules applied to banks, Hoenen stressed.
Rules for central banks and for politicians drawing up budgets
Wolfgang Gerke, one of the BFC’s presidents and thus one of the Bavarian Financial Summit’s organizers, cast a critical eye on both the private financial industry and on the public sector, and, specifically in the latter on central banks and on the politicians drawing up budgets. These were the real causers of the financial crisis, maintained Gerke, who went on to make the accompanying criticism that the countries participating in Pittsburgh’s G-20-summit failed to set policies shaping their fiscal and monetary policies.
Further Information
> Video Statements on the third Bavarian Financial Summit