European Central Bank policy maker Axel Weber said today that banks must be allowed to fold and backed the idea of issuing special bonds which would automatically convert to equity in the event of a crisis. He was speaking at the opening of Euro Finance Week, which is expected to see bankers and policymakers clash over how far to go with new regulation. Mr Weber stressed the need for stricter rules, saying a stable banking system was vital for long term growth. The policy maker also underscored a number of areas for improvements and said bail-in instruments were one option for large banks that play a key role in global finance. He also said banks need to be allowed to fold to avoid complacency and so-called 'moral hazard' developing among bankers. The Bundesbank's President also dispelled the idea that banks would have to cut their lending to businesses in the real economy to meet new capital requirements. Bank executives at the annual gathering are worried that yet more regulation on top of measures discussed at the G20 summit in Seoul last week will dent bank profits and, potentially, national economies. Speakers during the week include European Central Bank President Jean-Claude Trichet, IMF chief Dominique Strauss-Kahn, French Finance Minister Christine Lagarde, European Commissioner for Economic and Monetary Affairs Olli Rehn, German Finance Minister Wolfgang Schaeuble and Deutsche Bank's CEO Josef Ackermann.