Draghi rings the alarm against financial markets deregulation

STEPHANIE LECOCQ

- President of the European Central Bank (ECB) and chairman of the European systemic risk Board, Mario Draghi, attends a hearing of the European Parliament Committee on Economic and Monetary Affairs at the European Parliament in Brussels, Belgium, 06 February 2017.

Trump’s plan is “the last thing we need”


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Mario Draghi raised the alarm on President Trump’s plans for financial market deregulation on Monday evening.

What was Draghi talking about

Addressing the European Parliament, Draghi warned that loosening the banking regulatory framework was potentially dangerous. The President of the European Central Bank was referring to Trump’s stated objective to repeal or amend the DoddFrank Act. Last Friday, President Trump signed an executive order to review the regulation.

The Dodd-Frank Act was introduced in 2010 by the Obama Administration in response to the causes of the 2008 Great Recession. In Washington, Democrats received the news of pushback on financial regulation with fears comparable to those in Frankfurt.

Among other things, it affects the oversight over financial institutions, introduces more stringent regulatory capital requirements, regulates credit rating agencies, and the securitization market. The Trump administration has called for a review of the new banking rules with an intention to cut regulation.

On Monday, the President of the European Central Bank made clear that “the last thing we need at this point in time is the relaxation of regulation.”

The chairman of the European Parliament’s economic and monetary affairs committee, Roberto Gualtieri, echoed Draghi, suggesting the US unilateral policy would require “thorough reflection and action from the EU side,” he told the committee.

Euro exchange rate

Draghi also indirectly referred to the interview of the Chief of the US trade Council with the Financial Times last week, who accused Germany of exploiting other European Union member states and the United States with a “grossly undervalued” euro.

Peter Navarro said last Tuesday that it is, in essence, manipulating its currency, although Berlin is protesting against quantitative easing and is calling for higher interest rates. “We are not currency manipulators,” Draghi said on Monday.

Taking a classical view, the ECB President argued that the Single European Market is “protected” from competitive devaluations thanks to the Euro, rebutting the argument that the single currency is mainly boosting German exports.

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