The need to strengthen supervision, the importance of long-term thinking and a focus on the basic tenets of prudence are some of the main lessons learned over the past year of the crisis, the panel of top regional regulatory officials at the BBJ’s recent Finance Shaker agreed.
Ádám Farkas (PSzÁF), Radovan Jelašić (National Bank of Serbia),
Ágnes Nagy (National Bank of Romania)
Hungary, Romania and Serbia have a lot in common – they have all received rescue loans over the past year from international finan- cial institutions, they are all struggling with fundamental economic problems stemming from the practices of recent years, and, as par- ticipants of the event learned, they all have top regulatory officials who speak fluent Hungarian.
Radovan Jelašić, the governor of the National Bank of Serbia, Ágnes Nagy, board member of the National Bank of Romania, and Ádám Far- kas, the head of Hungarian finance watchdog PSzÁF, gave the audi- ence their view on the regional specialties of the crisis, the steps author- ities took to protect and shore up their respective financial systems, and what lessons can be learned from the events.
“Only when the tide goes out do you discover who’s been swim- ming naked,” Jelašić quoted Warren Buffett, pointing to the fact that financial institutions reaped the benefits of the boom for years while declining for the most part to save and prepare for the rainy days that eventually always come. Therefore, the panelists agreed that financial supervisions need to be beefed up, cooperation between national regulators strengthened, and a new EU-level supervisory body set up. “The EU has a common monetary and competition policy, so why not a common supervision?” Nagy noted.
The officials said that in all three countries, politics was slow to respond to economic challenges, regulation lagged behind the market, and also proved to be not flexible enough to deal with the changing environment. Although, Jelašić noted, when regulation did try to step in, such as in attempting to stem the tide of foreign- currency lending in Serbia, market players found ways to keep the money taps flowing. “We imposed a cap on forex lending to private individuals at 150% of the bank’s capital, but banks merely raised their capital and kept on lending,” he said.
One good thing that has come from the crisis, however, is that banks have learned the lesson of the importance of liquidity and risk manage- ment. “Banks are definitely paying much more attention to their liquid- ity positions, and I expect this will remain so for a long time,” said Far- kas. He also called attention to the need for a back-to-basics approach, so players do not forget the basic economic rules of fiscal prudence, even in years of dynamic growth and credit expansion.
It will fall on supervisory authorities to prevent a relapse. “We can- not rely on the memories of consumers, nor of the banking system, to learn the lessons of the past – these are quite short term,” noted Farkas. For more photos of the event, go to www.bbj.hu.