Trichet predicts tighter regulations on banks

The president of the European Central Bank, Jean-Claude Trichet, has blamed the summer's crisis on opaque financing models and mistakes by rating agencies, and has called for an overhaul of financial regulation.

Speaking today at the Frankfurt European Banking Congress, Trichet said: "Structured credit markets provide a pressing example of the need to increase transparency in financial markets." Complex structured credit products and off-balance sheet finance had made up "a recipe for propagation of turmoil and generalised contagion", he added.

He singled out rating agencies for particular blame, saying they should act "to improve the information content of ratings and to make the monitoring process more transparent". He also called for investigation of conflicts of interest around rating structured credit products.

Banks, too, had contributed to the crisis by relying on securitisation and off-balance sheet vehicles without strengthening their liquidity stress tests. "There is a need to reflect carefully on the 'originate-and-distribute' business model," Trichet said.