BASEL, Switzerland (MNI) – The new minimum capital requirements for
banks will greatly help long-term growth, European Central Bank
President Jean-Claude Trichet asserted Monday.

Speaking in his capacity as chairman of the bi-monthly Global
Economy Meeting held at the Bank for International Settlements, Trichet
said that the main observation of meeting participants was that emerging
economies continue to display relatively robust growth alongside more
modest performance at the level of advanced countries.

“The contribution to long-term stability and growth is in our view
substantial,” Trichet affirmed. “In the present episode of the global
recovery after this shock that we have to cope with in the previous
year, uncertainty is the enemy in a way … and with this decision
[enhancing minimum capital requirements] we eliminate uncertainty in a
large area, which I trust is a major contribution to consolidating the
global economy at present.”

Trichet declined to give “any precise figures” on how much capital
banks would need to comply with the new requirements, noting merely that
“it depends very much on your assumption on a number of factors” such as
banks’ earnings.

As to the enforcement of the new guidelines, “it is up to the
supervisors to control with the maximum amount of energy the respect of
the standards that we have decided at the global level,” he said. “And
of course this is something of extreme importance … all the colleagues
are determined to be very, very alert and vigilant in this domain.”

During the Global Economy Meeting, participants confirmed “at the
global level a sustained growth in the emerging world,” he said. Though
“it is really a high level of growth which looks sustained in most of
the economies,” he said, “it doesn’t mean there is time for being
complacent in any respect.”

“In the advanced economies I would say that we see with differences
here and there. .. growth which is certainly … more modest,” Trichet
continued. “The characterization would be modest growth in the advanced
and sustained growth in the emerging world.”

He stressed that growth in advanced economies is “modest” without
being “very modest” and asserted that “there is no point in speaking of
negative growth.”

The last remark, he subsequently emphasized, was not meant to
suggest a danger of a double-dip recession. “On the contrary; I said
that precisely to say that the materialization of that kind of risk was
not at all considered in the meeting.”

Although Europe revised up growth forecasts recently, the profile
remains one of modest growth, he said, “and that’s the reason why we
said that we did not declare victory.”

“As regards the issue of the risk of deflation, which is only a
question that you would ask in the advanced economies, I would say that
we do not see any materialization of the risk of deflation at the
present moment,” Trichet said.

In emerging economies, there is “certainly a posture of vigilance
on the part of the central banks in order to avoid inflation.”

Asked if it was only the ECB that saw the need to wait until next
year to undo special measures supporting the economy, Trichet replied
that “all the central banks that have embarked on extraordinary measures
have the sentiment that they are doing what they trust is appropriate
taking into account the situation,” which is “not a normal situation,
that is the justification for the non-standard measures.”

“And from that standpoint I would not make any difference between
the various central banks concerned,” he added.

–Frankfurt bureau tel.: +49-69 720142. Email: dbarwick@marketnews.com

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