Business News

Obama 'very justified' to act tough on banks, EU commissioner says

Jan 22, 2010, 17:56 GMT

US President Barack Obama on Thursday proposed giving banking regulators more power to limit the size of banks and restrict the scope of risk-taking in the hopes of preventing another financial crisis down the road. © Janet Mayer / PR Photos

Brussels - United States President Barack Obama's decision to crackdown on banks is 'very justified,' the European Union's economic affairs commissioner, Joaquin Almunia, said on Friday.

On Thursday Obama announced plans to give regulators more power to limit the size of banks and restrict the scope of risk-taking, in the hopes of preventing another financial crisis down the road.

'We all have the impression that financial entities in Wall Street have not yet learned all the lessons from the crisis, so I think the measures adopted by the US president are very justified,' Almunia told an audience of Spanish journalists in Brussels.

He argued that the measures are necessary given the 'resistance' displayed by US financial institutions to self-regulate themselves.

But Almunia - who is to become competition commissioner in the next EU executive, set to enter into office on February 10 after a vote of confidence of the European Parliament - explained that Europe faces different challenges in regulating its financial sector.

'Here in Europe there is no Wall Street putting brakes on financial regulation proposals that are being discussed, even though there is some tendency to believe that national solutions, at the level of (EU) member states, might be better than coordinated solutions at European level,' he signalled.

Almunia recognized that US banks and financial institutions were 'not the only cause' of the crisis, but he criticized 'excessive risk taking' and behaviour that was 'totally alien to the interests of the citizens and of a stable economy.'

European bank shares took a hammering Friday amid concerns that governments across Europe might follow Obama's lead and introduce tough new restrictions on the finance sector.