For example, the recent crisis drew the attention to the banking industry, many times blamed to have caused the global turmoil. There is no use repeating now how guilty the banks are, that is, the well-known sequence of events: the “sub-prime” lending, the “toxic” assets, the need to bail out banks and the subsequent economic and fiscal dimensions of the crisis. However, we should not turn a blind eye to the root cause: the role of politics and politicians. What about the call for “affordable housing” which was dominating the political ideology in the last two decades in the US (and not only there)? What about the related environment of low policy rates, coupled with the failure of regulators to identify and control systemic risks? Was that not really at the root of the asset bubbles and risky behaviour of the banks? We all know the answers. The “greedy” bankers are not the only ones to blame. Learning from emerging Europe At least, that is the story in the “advanced” countries. We should bear in mind that no shocks came from the so-called “periphery” of the euro area and emerging Europe. Rather, the crisis set in with the failure of financial markets and institutions in countries where they had supposedly been best regulated, most experienced and of highest liquidity. Being part of the global markets, the countries of emerging Europe became also part of the crisis. From today’s perspective, they could serve as a good example of mitigating and weathering the crisis.
This may serve as another example in this respect. After one year of much talking about them, these subsidiaries have kept doing well. There has been no withdrawing of liquidity from Bulgaria to support the parent institutions in Greece, nor have local residents moved their deposits to other banks. The banks’ shareholders confirmed their long-term commitments to stay and even expand activities in Bulgaria to exploit the opportunities on our market. Generally, the indicators of Greek subsidiaries in Bulgaria are equal or higher than the average of the system as a whole. We as supervisors and guardians of financial stability had to spend much time to dispel all the rumours and fears. These efforts were not in vain. Continuing reforms, letting banks work Governments need to stay firm in their efforts to conduct fiscal consolidation complemented by the necessary structural reforms. Politicians must not be afraid of reforms the needs for which are well understood. Even in the short run, reform-minded politicians get social and political rewards, as long as their message is clear. That has been demonstrated recently in both emerging Europe (with the re-election of a reformist government in Latvia) and also here in Greece (during the local and regional government elections last autumn). Policymakers should not yield under populist pressures. Better financial consumer protection and prudential regulations are certainly needed. But the banking industry should not be overburdened and prevented from fulfilling its traditional functions.