03 MAY 2011
By Leigh Phillips
EUOBSERVER / BRUSSELS - The EU's economic super-watchdog has warned that "many risks" remain to the stability of the EU's financial system and that the global crisis will last for many more years to come.
The two deputy chairs of the new European Systemic Risk Board - the bloc's new Frankfurt-based supervisor of supervisors tasked with oversight of the financial system within the Union - gave a frank assessment of the state of capitalism in Europe in their first hearing before the European Parliament's economics committee.
"There are still many risks to the recovery of the European economy," said Mervyn King, the ESRB's first vice-chair and head of the Bank of England.
"The economic challenges will last for many years ... The financial crisis is very far from over and the impact will be felt for many years to come."
He and his fellow vice-chair, Andrea Enria, also the head of the European Banking Authority, said that the eurozone's sovereign debt crisis is not the only danger present.
Enria warned that systemic risk still lies outside regulated areas and that financial innovation is happening so rapidly these days that even in the case of appropriate regulation, capital is already able to pick up stakes and move on to another, unregulated area.
He said that the ESRB, which opened its doors in January, faced "significant challenges" both in data collection on systemic risk and on the credibility of that data.
King meanwhile said that the board may have to argue for a limiting of credit growth or take on climbing asset prices, recommendations that may not be very popular amongst financial institutions when the going is good.
"At times the ESRB will be doing things that are unpopular ... We will need your support," he told the lawmakers. "We will need the help of parliament to take on financial institutions that sometimes have enormous lobbying power."
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