UPDATE: ECB Weber: Price Stability Goal Must Stay Paramount

"The key concern of central banks--to preserve price stability--mustn't be weakened, nor should central banks' independence be jeopardized," said Weber, who is also the president of the German Bundesbank.

Regulators and supervisors must continue to play an important role in preserving financial market stability, he said.

Answering questions later, Weber reminded his audience that it will only be possible to tighten banks' capital requirements once the economic situation allows.

"We aren't out of the crisis yet," Weber said. "We are out of freefall, but we are not yet in a state of complete stabilization."

Weber also repeated his opinion that it would be unwise for Germany to attempt to solve the issue of banks that are "too big to fail" by forcing them to split their various business lines, along the lines of the former Glass-Steagall Act that separated retail and investment banking in the U.S. for much of the last century.

In the German context, "I don't think it makes sense to go in this direction," Weber said. He added that such a policy would not have prevented, for example, the collapse of the U.K.'s Northern Rock Plc - "a bog-standard real estate lender."

In a universal bank such as Deutsche Bank AG (DBK), the large deposit bases of the retail banking operation creates a far stronger liquidity position than a pure investment bank would normally have, allowing it to enjoy higher credit ratings and lower funding costs. At the same time, it can be construed as allowing the investment bank operation to rely on such a safety net to indulge in highly speculative activities.

-By Nina Koeppen and Geoffrey T. Smith, Dow Jones Newswires; +49 171 569 4340; nina.koeppen@dowjones.com

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