FRANKFURT (MNI) - The European Central Bank should not use interest rates to address asset price developments, European Central Bank Governing Council member Axel Weber said at the European Banking Congress in Frankfurt on Friday.

Instead, the Bundesbank president said, the ECB would use additional regulatory tools to prevent market exaggerations in the future.

"It would be a mistake to use interest rates or the price stability mandate to address that issue," Weber said. "I would not use interest rates as a tool. Interest rates are there to ensure price stability and consumer price stability. There are many other things that can be done."

"This is exactly what we will discuss in the future," he added.

Weber said that the ECB would look at warnings and regulatory tools to bring "long term developments somewhat more in line with short-term developments."

He also expressed confidence that the ECB would be able to spot market excesses in the future, as its monetary and credit analysis would signal the right time to lean against the wind.

"In the long term there has to be a certain correlation between income expansion and money-credit expansion," he said. If credit grows faster than income, "there has to be a correction."

Weber also argued that poor risk management by banks was the key force behind the financial crisis, and that monetary policy is not to blame.

"Monetary policy is not part of the culprit," Weber said, rejecting the notion that low interest rates fueled asset price rises in the eurozone.

He argued that when interest rates need to be low to ensure price stability, banks shouldn't capitalize on that to maximize profits. If they do, then it's a "management mistake, not a monetary policy mistake," he argued.

Weber also defended the role of regulators, saying there was not a single cause for the crisis. A whole set of measures are needed to make the financial system more resilient in future, he said.

"Risk management in the banks is the first line of defence. Of course if risk management in the bank fails, the second line of defense is regulation, but don't expect regulators to be better and more forward looking," Weber said.

He also warned that market innovation will always be a step ahead of regulators given the long and tedious legal process that regulatory rules must clear before being implemented.

However, Weber rejected the idea of a regulatory system similar to that of the pharmaceutical sector, in which each individual product must be approved before entering the market.

Asked what was needed to ensure a more resilient financial system, Weber said: "Because there is no single cause, there cannot be a single answer. it has to be regulation, more capital, better liquidity management, better risk management -- the whole set of brutal changes that are on the way now."

He warned that during the crisis everyone is in favor of introducing better regulation, but as soon as there is recovery, these measures will be criticized.

"There is cyclicality also in regulation...What we have to make sure of now is that we forget cyclicality. We will be just focusing on these issues...We won't give a damn what anybody says."

"Can we prevent the next crisis? We cannot prevent and predict the next crisis. What we have to make sure of is that when the next crisis comes, and it will come with 100% probability, the system then is more resilient," he said.