ECB’s Knot: Additional Reforms Needed for Greater Financial System Resilience
16 November 2023
By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Klaas Knot on Thursday said that making progress in implementing financial reforms and responding to new vulnerabilities could improve the resilience of the financial system.
In a speech at the annual conference of the European Systemic Risk Board (ESRB), a text of which was posted to the website of the De Nederlandsche Bank, which he heads, Knot said that ‘[a]s long as we advance the implementation of the reforms already agreed upon. And as long as we work together across jurisdictions to address emerging vulnerabilities… we can safeguard a future in which the financial system remains a source of growth and prosperity for our economies.’
There were lessons to be learned both from the global financial crisis and the collapse of banks some months ago, he said. ‘The failures of various banks this year were an important reminder of the speed with which vulnerabilities can be triggered in the current environment.’
However, the pursuit of financial stability must also consider the non-bank sector, he said.
Many countries had limited fiscal space as a ‘consequence of elevated public debt, alongside a higher interest rate environment.’
‘And, of course, until inflation is returned to target, monetary policy space is similarly constrained’, he said. ‘Thus, the scope to lean against an economic downturn is more limited than in the past.’
‘For this reason, financial policy makers need to be especially vigilant’, he said.