ECB's Rehn says role of banks as finance providers is eroding in Europe

ECB's Rehn says role of banks as finance providers is eroding in Europe
FILE PHOTO: Finland's central bank governor Olli Rehn smiles during an interview in Helsinki, Finland July 17, 2018. REUTERS/Ints Kalnins Copyright INTS KALNINS(Reuters)
By Reuters
Share this articleComments
Share this articleClose Button

HELSINKI (Reuters) – The role of banks as providers of finance has started to erode in Europe and some other parts of the world, the Bank of Finland’s governor Olli Rehn said on Friday, calling for new central bank tools to safeguard financial stability.

“In Europe, an increasing share of lending is provided by investment funds, insurance companies and the providers of consumer loans,” the European Central Bank policymaker said in a speech in Helsinki.

Rehn, who is seen as a potential successor to ECB President Mario Draghi, dismissed as “theological” a debate on whether financial stability should be formally made part of the ECB’s mandate and said that European decision makers were at “a risk of fighting the past wars” if new policies for preventing financial crises were not adopted swiftly.

Rehn said the new developments that needed monitoring in Europe included investment funds taking more credit risk and investing in less liquid assets, the relative importance of traditional loan products decreasing in some countries and consumer loans being marketed aggressively.

“Financial systems change, and the changes bring new risks,” he said.

In Finland, where coalition talks are still ongoing to form a new government after a general election on April 14, Rehn has been lobbying for the introduction of a national cap on a loan applicant’s debt-to-income ratio to contain household debt accumulation.

“Many macroprudential policymakers share the Finnish view that their macroprudential toolkits should be more comprehensive than today,” Rehn said.

(Reporting by Anne Kauranen; Editing by Toby Chopra)

Share this articleComments

You might also like

Germany went from envy of the world to the worst-performing major developed economy. What happened?

US and China launch economic and financial working groups to ease tensions

Sweden's central bank ramps up key interest rate over high inflation