ROME (MNI) – The officials of individual Eurozone states, not the
European Central Bank, must solve the problems of banks that are still
“addicted” to ECB funding, Governing Council member Mario Draghi said
here Friday evening.
National authorities “have to resolve this, otherwise we’ll have
zombie banks in the EU,” Draghi warned.
Speaking at a conference organized by the Bank of Italy, which he
heads, Draghi underscored the thorny dilemma the ECB faces in
withdrawing its non-standard liquidity measures.
“A successful exit strategy has to respond to two conflicting
needs,” he said. “First it’s essential to continue to support the
orderly functioning of the interbank and financial markets and to
sustain the flow of credit to the economy in a situation that has
improved but remains fragile.”
However, “at some point we must stop in order to avoid creating
distortion,” he added. “We must not sow the seeds of future imbalances
by creating too much liquidity. A successful exit strategy will also
require banks to obtain adequate funding from the market, reducing the
need for central bank intermediation.”
Bank of France Governor Christian Noyer, speaking at the same
conference argued that having low interest rates for too long can lead
to excessive risk taking. Surging credit growth in the past has led to
asset bubbles, leading some to raise the question of whether monetary
policy should address such bubbles, Noyer noted.
[TOPICS: M$$EC$,MGX$$$,MT$$$$,M$X$$$,M$$CR$]
