European Central Bank Executive Board member Juergen Stark said the financial industry has “veered” from its core role of servicing the economy and reforms are needed to put it back on course.

“The current process of overhauling financial system regulation is an important factor to help the financial sector become safer and thus eventually to contribute to sustainable economic growth,” Stark said in a speech in Frankfurt today. “It’s now important not to lose momentum and to strictly follow the schedules for implementation. The guiding principle on all regulatory measures and any re-dimensioning of the financial sector must be: finance has to regain its core role of servicing the real economy without becoming a source of risk itself.”

Stark said further action is needed to complete an action plan drawn up by Group of 20 nations three years ago such as “regulation of credit rating agencies” and of the shadow banking system including hedge funds.