In brief

• Isabel Schnabel, a departing member of the ECB Executive Board, opposes rolling back banking sector regulation.
• In her view, the arguments for deregulation are flawed, and the costs of such changes could be considerable.
• Schnabel will join the IMF at the beginning of January, earlier than planned.

Appeal to governments

The outgoing ECB board member called on governments to counter initiatives aimed at rolling back banking sector regulation (Zinserhöhung: Britische Notenbank hebt Leitzins auf vier Prozent an – FAZ.NET) ("Fehlerhafte" Argumente dafür: EZB-Direktorin Schnabel: Deregulierung von Banken sei zweifelhaft - n-tv.de – n-tv.de) (EZB-Direktorin Schnabel warnt vor Bestrebungen zur Deregulierung von Banken | cash – cash.ch). The statement was made on Thursday at an ECB conference in Frankfurt.

Objections to the arguments

Schnabel believes that many of the arguments in favor of deregulation are mistaken. In her view, the benefits of such changes are doubtful, while the potential costs are significant.

Effectiveness of post-crisis reforms

As evidence, she pointed to the reforms introduced after the global financial crisis. Thanks to them, the banking system acted as an anchor of stability during recent shocks.

Risk of activity shifting outside banks

Schnabel noted that the shift of financial activity to the less regulated non-bank sector has made the financial system more vulnerable to shocks. This may also threaten banks' stability, since financial institutions are closely interconnected with entities outside the banking sector.

Departure from the post

Schnabel, who has sat on the ECB Executive Board since 2023, will end her term early at the beginning of January and move to the International Monetary Fund.

Also read

• Wysoki dług i rosnąca rola instytucji pozabankowych mogą ograniczyć swobodę EBC, ostrzega Schnabel