By Jan Lopatka (Reuters, 29.9.2009)
Policymakers may be doing more harm than good by pushing forward with much of the proposed tougher regulation of the financial industry, Czech central bank Vice-Governor Mojmir Hampl said on Monday.
Hampl said politicians from both east and west had adopted a herd mentality in their attempts to come up with a fix to the industry, and had no right to lecture the market over overspending given the record of most on state budgets.
"(It is) fascinating for me how these people are teaching market players that market players were not preparing for bad times more in advance, had no reserves for bad times and behaved procyclically," Hampl told the Reuters Central and East European Investment Summit in Vienna.
"Frankly these are exactly the same finance ministers who on average were conducting very procyclical fiscal policies in times prior to the crisis, having huge deficits in good times.
The G20 group of countries over the weekend agreed to pursue regulation of pay in the financial industry, while the European Union last week released a blueprint of proposed plans to boost EU-wide regulation.
The bloc plans to create a banking super-watchdog, with power to overrule countries, and a pan-European supervisor that would warn of early signs of crisis.
Hampl, who joined the bank board in 2006 and has been a vice-governor since last year, criticized the plans to regulate wages, oversee unregulated parts of the industry, ban certain products, or what he called politicizing accounting standards.
"My suspicion is that many of the proposals that are right now being put on the table will eventually become the reasons for the next financial turbulence."
"Without consideration of long-term impact (they) are proposing very tough and important regulations that might influence the whole financial industry over the long term," he said.
Overhauling the way Europe's banks and financial services are policed is central to legislation Brussels has drafted to prevent a new financial crisis.
The EU draft laws flesh out principles for reform agreed by EU leaders in June when Britain accepted new pan-EU supervisors for markets, banks and insurers that have binding powers over European member states.
The rules need the approval of the 27 EU national governments and the European Parliament to take effect.
(editing by Patrick Graham)