FRANKFURT (MNI) – The members of the Executive Board of the
European Central Bank were all appointed with an eight-year contract,
ECB President Jean-Claude Trichet said Wednesday, in reference to
efforts by Italy and France to convince board member Lorenzo Bini Smaghi
to step down before his term ends.

Speaking at a press conference of the European Systemic Risk Board,
which he chairs, Trichet stressed that the meeting had nothing to do
with monetary policy and also did not discuss Greece.

However, asked to react to efforts by national governments to
persuade Bini Smaghi to step down when his fellow countryman Mario
Draghi takes over as ECB president, Trichet pointed out — as he has
before — that “all the members of the Executive Board have a mandate of
eight years” and this is reflected in the Treaty.”

He added: “That means that the Executive Board members of the ECB
are taking their decisions in full and total independence.”

The longstanding agreement, though it is not a legal requirement,
is that each of the four largest Eurozone economies has one national on
the board. With Trichet’s retirement from the ECB on October 31 and the
arrival of Draghi, there would be two Italians and no French on the
board. France is pressuring Italy to find an incentive for Bini Smaghi
to step down.

With respect to the crisis in Greece, Trichet said the Eurogroup’s
statement from last Sunday “has been published, it is known” and it is
“important.” He declined to comment further.

Asked later how private sector bondholders could be persuaded to
participate in a new bailout package for Greece, which is the current
plan, Trichet repeated merely that he would “stick to the statement of
the Eurogroup that has been published the 20th of June.”

On the actual meeting of the ESRB, Trichet said the board wanted to
send the message that “the most serious risk to financial stability in
the EU” was the possibility of a negative feedback loop between
sovereign debt problems and the banking system.

Also at the press conference, Bank of England Governor Mervyn King
declined just as firmly to make any comment on monetary policy.

European Banking Authority Chairman Andrea Enria, also in
attendance, noted that European bank stress tests were not yet finalized
and were currently in the “quality assurance peer-review process.” He
said there are some issues with regard to the quality of the data and
inconsistencies, and that he expected resubmissions from the banks in
the coming days.

“We will then see what the results are,” Enria said. “In any case,
in the case of failures, we want there to be appropriate backstops to
deal with them.”

–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

[TOPICS: M$X$$$,MGX$$$,M$$EC$,M$$CR$]