Stability before competitiveness, say supervisors

Financial Stability Should be a Priority, Say Top Officials

Top officials from the European Central Bank (ECB) and the Bank for International Settlements (BIS) have made a compelling case for prioritising financial stability over measures aimed at enhancing competitiveness and growth.

Financial Stability is Key

This viewpoint was discussed during a panel at the Institute of International Finance’s (IIF) annual meeting held on October 15. Sharon Donnery, a key member of the ECB’s supervisory board, made a robust argument, stating that her team’s contribution to competitiveness stemmed from ensuring the safety and stability of the financial system.

Understanding the Role of Supervisory Authorities

Supervisory authorities play a vital role in the financial ecosystem. Their primary task is to maintain the integrity and stability of the financial sector, which in turn fosters trust among investors, businesses, and the public at large. This trust, according to Donnery, is a crucial ingredient for promoting competitiveness.

The Balance Between Stability and Growth

While it’s undeniable that competitiveness and growth are important aspects of any economy, the officials argue that these should not be pursued at the expense of financial stability. The global financial crisis of 2008 highlighted the catastrophic consequences of prioritising short-term gains over long-term stability.

Looking Forward

With the current economic uncertainty caused by factors such as the COVID-19 pandemic, the role of supervisory authorities in ensuring financial stability is more critical than ever. By putting stability before competitiveness, the ECB and BIS officials believe that we can build a stronger and more resilient financial system.

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