An ECB policymaker has called for maintaining strong regulatory safeguards to protect banking resilience, warning that broad deregulation could undermine financial stability.
Speaking at a global finance symposium, the official emphasized that while financial innovation and private credit markets can expand funding options, they must not replace robust banking oversight. The policymaker argued that balanced regulation remains essential for sustainable growth.
He noted that geopolitical tensions and rising asset valuations have increased systemic risk, and history shows that relaxing safeguards too quickly often leads to costly crises. The official urged decision-makers to pursue targeted, evidence-based reforms rather than sweeping rollbacks.
The speech outlined how microprudential supervision should work alongside macroprudential tools to contain spillover effects across the banking sector. He reminded the audience that banks remain central to credit provision in many economies, and regulators must monitor contagion risks, especially as non-bank credit grows rapidly.
Industry leaders were encouraged to strengthen risk management, including stress testing for liquidity and market shocks. The policymaker acknowledged calls from some business groups for looser rules to stimulate lending but defended the ECB’s precautionary stance as vital to consumer protection and trust in the financial system.
He concluded by stressing that regulatory frameworks must evolve with new business models but should never sacrifice stability for short-term expansion.
