BERLIN (MNI) – Policies to assure financial stability cannot
pretend to prevent the collapse of every individual institute that comes
under pressure, European Central Bank Governing Council member Axel
Weber said Tuesday.
Now that the most urgent response to the financial crisis has been
made, the focus should turn to “lessons for the medium to longer term,”
the president of the Bundesbank said in a speech for delivery here.
As consequence of crisis, two lines of defence appear appropriate,
Weber said. The first is to make it less likely that any individual
institution should ever face the risk of default.
“However, in a market economy it is neither possible nor desirable
to rule out completely the collapse of individual banks,” he conceded.
The second line of defense is to assure that the failure of one
institution does not affect institutes throughout the sector, he said.
Weber recognized that “fiscal burden of the crisis and the
consequences of budget mistakes of some Eurozone member states have
significantly affected confidence in the long-term sustainability of
public finances of some eurozone countries.”
–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com
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