Apparently, I have misread the debate about the future of financial supervision and regulation in Europe. The objective, I had naively assumed, was to ensure that the financial sector would in future make a sustainable contribution to economic growth. In other words, bankers would create jobs and oil the wheels of the real economy, without leading us all off into dangerous adventures with credit default swaps and so on.
Not so, at least according to the European Central Bank. It has just released its opinion on the proposed new European Systemic Risk Board, which willtake an overview of risks facing the continent’s financial system. The ECB is broadly content with the plans – unsurprisingly, because it was involved as they were drawn up and they give the ECB and its leaders a significant extra role.
But flipping through the proposed ECB amendments I was surprise to see one change the ECB wishes. In a section setting out the new board’s responsibilities, the ECB wants to delete the line saying it should “ensure a sustainable contribution of the financial sector to economic growth”.
By way of explanation, the ECB says it “is of the view that ensuring a sustainable contribution to economic growth is not the motivation behind macro-prudential oversight”. That may be technically correct, but the risk is that the ECB will only inflate the impression many politicians have from its monetary policy that it cares little about boosting growth.
Left in the text would be an obligation to “avoid episodes of widespread financial distress and contribute to the smooth functioning of the internal market”. That is laudable enough but surely the ECB would not object too much to the idea that the world could also be made a better place in the process?