Stefan Ingves, governor of the Sveriges Riksbank, said he would like to see a supranational regulator for the major cross-border banks in Europe.
Speaking at the Reserve Bank of Australia, Ingves said: “When banks start becoming important in several countries, there a mismatch between the potential problems and the roles of financial supervisors and regulators. In the prevailing regulatory structures there are very few arrangements for supervision and crisis management designed for managing externalities with cross-border impact.”
Ingves said he thought such an organisation was possible at an EU level because the necessary infrastructure was already in place: “Within the European Union there is already a framework for supervisory and regulatory co-operation, based on the common legislative process in the form of EEC-directives and regulations. Moreover, some institutional arrangements for supervisory co-operation are in place, even if they do not have any legal powers.”
He said he would eventually like to see the creation of a global body which had the power to regulate banks with “substantial” cross-border activities: “The simple rationale is that the creation of such a body is the only way to fully manage the conflicting national interests.
He added: “A single authority supervising cross-border banking groups instead of several would most certainly increase the comprehensiveness and the effectiveness of the supervision. For the firms subject to supervision, it could mean the regulatory burden would eventually be reduced considerably.”