financial integration

A security should be for life, not just for Christmas. Or at least part of the security.

That is—paraphrased—one of the many judicious suggestions from the Stability section of the ECB’s fourth Financial Integration in Europe report, released today. The proposals seem clever and heart-warmingly risk averse. But the elephant in the room—whether further integration is actually a good thing—is taken as a given: “the progress towards more advanced and integrated financial markets cannot and should not be seen to stand in contrast with the objective of financial stability,” states the report.

Specific suggestions …on …financial reform …include requirements that originators retain an economic interest in their securitisations, that products be simpler and more standardised, intermediation chains shorter, collateral better documented, the role of ratings reduced and investor diligence strengthened, and – more generally – that capital and liquidity requirements be strengthened and made less pro-cyclical.

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Ralph Atkins

As if Greece was not creating enough gloom about eurozone divergences… A European Central Bank-hosted conference next week is likely to highlight further setbacks to Europe’s monetary union that have resulted from the global economic storms of the past three years.

The occasion will be one of the last set-piece events attended by Lucas Papademos, ECB vice president, who has had responsibility for financial stability issues and steps down at the end of May. He opens the conference on “financial integration and stability: the legacy of the crisis”. Read more