Putting the ECB in charge of supervising the larger euro zone banks is an important step to make the bloc''s institutions more crisis resilient, but more needs to be done to avoid a renewed crisis flare-up, the ECB said. "The situation is still very fragile in many ways," ECB Vice-President Vitor Constancio told reporters at a presentation of the bank''s twice-annual Financial Stability Review. "Key financial stability risks remain and there is no room for complacency," the ECB said in the report.
The main risks are a possible renewed intensification of the crisis if governments fall behind on their reforms, a deterioration of banks'' health and further funding strains as money and debt markets are still not functioning properly. Although banks faced lower refinancing needs next year than this year, there was still a lot of pressure because of funding restrains and higher capital requirements, Constancio said. But he also said that a new set of tougher banking standards on capital and liquidity, known as Basel III, would not be implemented in 2013, which would give banks more time to adapt.
"The implementation will not be in 2013, because there were delays in the final definition of the liquidity ratio," he said. His ECB colleague, Joerg Asmussen, also noted the risk that an easing of financial market pressure could encourage policymakers to take their foot off the gas. "The work on (reform efforts) must be continued vigorously," he told Reuters.