The success of a new watchdog in gaining a big picture of financial risks will depend on financial institutions, European Central Bank Executive Board member Lorenzo Bini Smaghi said in remarks released today.
Mr Bini Smaghi said the European Systemic Risk Board (ESRB) - a new body to be chaired by ECB president Jean-Claude Trichet - was like a doctor, who could make a diagnosis and recommend medicines but not force the patient to take them.
"Its success will largely depend on the compliance of its 'patients', who hopefully have learned the lessons of this crisis," he said in the text of a speech at Venice University, posted on the ECB's website. When setting the legal framework for the new body, Mr Bini Smaghi said the ESRB should have power to request any information it deemed necessary, and financial supervisors should follow up on its risk warnings.
"As the recommendations will not be binding, there should be institutional mechanisms to ensure that they are implemented. And if they are not implemented, an explanation has to be provided," he said.
"The ESRB may decide to make the recommendations public. As the recommendations aim to address systemic risks, their publication will increase pressure on the Member State to implement such recommendations."
Reuters