In brief

• Outgoing ECB Executive Board member Isabel Schnabel opposes rolling back banking regulation.
• In her view, the arguments for deregulation are flawed, and its benefits are doubtful while the possible costs are substantial.
• Schnabel is leaving the ECB ahead of schedule and will join the IMF from January.

A warning against deregulation

Isabel Schnabel, a member of the six-person ECB Executive Board, called on governments on Thursday, at a conference in Frankfurt, not to roll back banking regulation introduced after the global financial crisis ("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). In her view, many of the arguments in favour of deregulation rest on flawed assumptions, and their benefits are doubtful, while the possible costs would be significant.

Banks as a stabiliser

Schnabel pointed out that, during recent shocks, the banking system acted as an anchor of stability, which she attributed to the reforms carried out after 2008.

Risks outside the banking sector

Schnabel noted that the shift of part of financial activity into the less regulated non-bank sector has increased the financial system's vulnerability to disruptions. The risk also affects banks themselves, which are closely linked to non-bank entities.

Departure for the IMF

Schnabel is leaving her ECB post ahead of schedule and, from the beginning of January, moves to the International Monetary Fund. Her warning against deregulation can therefore also be seen as part of a summary of her tenure at the central bank.