EU Internal Markets Commissioner Charlie McCreevy has strongly criticised banks and regulatory authorities, claiming they “exacerbated” the current financial crisis through lax lending practices and flimsy business models.
In an address to hedge fund managers in Brussels today, Mr McCreevy said the financial system failed to stem the flow of leverage, tolerated relaxed lending practices and “the accumulation of unsustainable debt by households, individuals and companies”.
“While our regulation was not the root cause, our financial regulatory and supervisory system aided and abetted the super-bubble,” he said.
The former minister for finance said Europe could not regulate itself out of the current crisis.
“Fixing regulation and supervision will not extract us from the present mess. But we must draw the consequences from today's crisis and take action,” he said.
Mr McCreevy said regulation of hedge funds and private equity should be effective and not counter-productive.
He said hedge funds and private equity “surfed the wave of abundant liquidity and cheap credit”.
“Now as the financial system crumbles, they are easy scapegoats for more deep-rooted problems. Before we rush out to point the finger of blame we should not forget that hedge funds and private equity have not been central to the crisis, and it is not just me that says so”.
On the issue of imposing a tighter regulatory environment on banks, Mr McCreevy said the European Commission is examining what further measures might be warranted.
“Our aim is to put the financial system back on a more secure and sustainable footing. And to prevent a recurrence of recent catastrophic events,” he said.
