Ingves: The importance of being savvy - lessons on European crisis management
Summary
Governor Stefan Ingves held a speech about his views on what constitutes core principles for effective crisis management. He argued that since crises are bound to re-occur, we must be willing to learn from our previous mistakes – and also successes - to improve the handling of financial crises. The main message was that since handling a financial crisis is messy, takes time and is costly, regulators and other authorities must stick to three basic principles; firstly, cooperate; secondly, act swiftly; and thirdly, be economically savvy.
Governor Ingves presented a number of examples – mostly drawn from the recent financial crisis – on cases where these crisis management principles were violated with detrimental consequences for financial stability and the wider economy. He also spoke about how regulation may facilitate - but also hinder - the application of the crisis management principles.
It was argued that regulatory reform in Europe is vital in order to equip supervisors and other authorities with the tools to prevent crises from occurring and to handle them more effectively when they do. In particular, special bank resolution regimes are necessary to effectively manage a banking crisis. Mr Ingves stressed that we need to act while there still is political will to reform the regulatory crisis management framework. Once banks have returned to prosperity, the political window of opportunity may well be closed.
Read the whole speech in the PDF file below.
