Top official claims only the ECB can end regulatory nationalism

 
Tim Wallace
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NATIONAL banking regulators could be tempted to direct more lending internally to boost their economies, distorting the market and damaging the flow of international finance, a top EU official claimed yesterday.

The European Central Bank’s (ECB) Benoit Coeure said that his organisation should be given more power over regulation as it could be trusted to act in the interests of the market and the EU as a whole.

“During crises, supervisors acting within their national mandates may encourage domestic banks with subsidiaries abroad to repatriate capital and liquidity, if a subsidiary is located in a country under stress,” he said.

“An authority acting within a European mandate, however, would not penalise cross-border lending in that way, leading to less financial retrenchment and renationalisation of funding.”