President of European Central Bank (ECB) Jean-Claude Trichet said in Brussels on Wednesday "the main role of national central banks is safeguarding financial stability."
He said this to the Economic and Monetary Affairs Committee just one day after the U.S. Federal Reserve cut interest rates to stimulate economic growth and stabilize stock market.
When asked if the ECB would follow suit, Trichet said the ECB's mandate "is to deliver price stability for citizens, over the medium term, and be credible in this, so inflationary expectations remain anchored."
"Central banks may take actions aiming at restoring liquidity," he said, but "the effectiveness of crisis management and resolution depends largely on the existence of an effective supervisory central bank framework able to identify and react at an early stage."
He also made the point that recent experience had confirmed the ECB's view that "a close institutional link between central banks and banking surveillance authorities is extremely important."
Trichet said Euro system "provides for an extremely strong and effective decision-making in the area of central banking."
"Potential disturbances have EU-wide effect (and) the EU financial stability framework should therefore be able to detect any crisis with a cross border dimension," he said, referring to the European economy.
Inflation must be kept under control "in all circumstances" but even more "in demanding times of significant market correction and turbulences when central banks are "responsible of solidly anchor inflation expectations", the ECB president noted.
"There will be very important lessons to be learned by credit institutions in terms of risk management ...the experience of the turbulence has highlighted that some categories of risks have been underestimated by banks," he said.
Slovenian Finance Minister Andrej Bajuk and Alexandre Lamfalussy, architect of the EU's financial market supervision system also attended the closing session of the two-day meeting centered on how to improve European financial supervision and crisis management on financial markets.
Source:Xinhua
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