In his speech to the Campus for Finance at WHU Otto Beisheim School of Management Thomas Mirow looks at the shortcomings that have produced a financial crisis that has resulted in huge economic and political costs. He refers specifically to ineffective regulation and supervision of the financial markets, unsustainable public and private leverage, credit-led growth, lack of policy coordination in the eurozone and regional macroeconomic imbalances.
The President highlights the problems in emerging Europe, referring to excessively rapid financial development and its consequences in some cases. He points out that, now, banking in Europe is undergoing its most profound change since the start of the deregulation process 30 years ago and new national and international regulatory frameworks are being reshaped or created in order to pay more attention to systemic or macro prudential risks.
The President believes that in the long run a whole new business model is needed, where subsidiary funding will be more reliant on local deposits and – where they have been developed – local bond markets, and notes that the EBRD can play a role in building local capital markets in emerging countries and generally supporting financial sectors.
He concludes that “The banking sector is at a crossroads”.