benoit cœure : interview in l'obs interview with mr benoit cœure, member of the executive board of the european central bank, in l'obs, conducted by ms sophie fay and mr pascal riche on 15 may, and published on 23 may 2017. * * * in the united states, the administration wants to reconsider the banking regulations put in place after the 2008 financial crisis. the united kingdom is tempted to do the same in the context of brexit. in france, emmanuel macron also thinks that the steps taken were excessive. is this a threat to the stability of the financial system? yes, the threat of deregulation exists. in many places there appears to be a temptation to revisit the financial regulation adopted by the g20 countries, which has been a huge project : we have strengthened the capital requirements and liquidity of banks, limited their size, regulated potentially dangerous products, such as derivatives, and started to put in order what ’ s known as shadow banking, which takes place outside the banking sector. it comes as no surprise that the financial industry dislikes these new rules. the large banks say that they hinder lending and increase the cost of capital. but this is not the case in the euro area, and even less so in france. banks have significantly strengthened their capital base since 2010 and yet they have never made so many loans at such low rates. the temptation of a regulatory race to the bottom exists in any industry, but it is even stronger in finance. it took enormous political energy on the part of the heads of state or government, following the financial crisis, not to give in to it. but whenever this political will weakens, the temptation of a race to the bottom returns. such a temptation exists in the united states, although for the time being the new administration has not expressed any desire to backtrack on financial cooperation, either in the g7 or the g20, which is comforting. emmanuel macron has also said that he wants to reconsider certain banking rules, notably on the required level of own funds. his comment was born of good intentions : to facilitate the financing of smes. but there are other instruments available for that purpose. it would be useful if, once a year, the ministers of finance and economic affairs of the eu were to examine the impact of regulation on the financing of businesses. but that must not be a pretext for dismantling what has been achieved

… yes. in order to encourage people to innovate they need to be able to enjoy the fruits of their innovation. but if rents are excessive, a minority appropriates the benefits of globalisation and technological progress. finance is necessary to fund innovation, but it may itself become an excessive source of rent - seeking. how? large financial institutions naturally tend to grow in size in order to exploit economies of scale, diversify, and reduce their financing costs. if they are too large, that creates a problem of competition and this creates rents. it also encourages a phenomenon specific to finance : being “ too big to fail ”. a large financial institution may take unreasonable risks because it knows that the public authorities will have no choice but to rescue it if something goes wrong … that race for size must be avoided by way of regulation. another phenomenon specific to finance is rents being built up by individuals. a proportion of financial industry employees are remunerated at unreasonable levels when measured against their value to society, as thomas philippon and ariell reshef have clearly shown. this misappropriation is socially unjust and must be regulated. hence the eu legislation aimed at regulating the distribution of bonuses. some countries, such as the united kingdom, have gone further in making senior bank managers criminally liable in the event of excessive risk - taking or lack of control. it is a political choice. france also could do it. all these rules reduce the risk of financial crises, which tend to deepen inequality. too often in the past, taxpayers have borne the cost of bank recapitalisation post - crisis. and banking crises, by causing economic activity and employment to fall, hit the most vulnerable in our societies the hardest. europe is endeavouring, with a set of new rules, to avoid the costs of these crises being borne by taxpayers, by calling on bank shareholders and creditors. what is europe doing otherwise to combat inequality? to reduce inequality, redistribution instruments are needed, i. e. taxes and transfers. only a legitimate, elected parliament can decide to tax some people to give to others. at global level, such a legislature obviously does not exist. at european level, it does. this is an extraordinary 2 / 3 bis central bankers'speeches opportunity! it should be used effectively. the paradox of globalisation is that the greater the need for redistribution instruments, the more they are called into question. for example, it is becoming increasingly difficult to tax large companies, which are now operating on