Buba's Zeitler sees financial mkt turbulence as 'serious' test of global
Current turbulence on financial markets is a ""serious"" test for the global financial system and will have an impact on growth in the euro zone and in Germany, said Bundesbank vice president Franz-Christoph Zeitler in a speech.
But growth close to potential is still the ""most likely scenario,"" he said, according to a copy of the speech.
At the same time, the US sub-prime mortgage loan crisis has sparked concern in market participants that other sectors or securitization products could become affected by the turbulence, such as credit card debt or consumer loans.
One example of the effects of such jitters is the impact on the covered bond market that led to a temporary halt of interbank trade with jumbo covered bonds, Zeitler said.
""Just like with a wave of influenza, it cannot always be prevented that someone healthy is infected,"" he said.
""What is decisive then is the immune system of the affected person, or in the language of financial markets: the fundamental strength of a product.""
Zeitler said there can be no doubt that the German mortgage-backed covered bonds -- called Pfandbrief -- have such strength and have retained their importance as a refinancing tool in Germany, albeit with wider spreads.
""That is why in the current market environment everything should be avoided that will lead to a discussion over lower standards of Pfandbriefs,"" he said, referring especially to possible stricter regulation of Pfandbriefs.
Adding more bureaucracy and more regulation would be the ""wrong lesson"" from 2007, Zeitler said.
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