Coeure Says ECB Should Look at Getting Loans Into Real Economy

The European Central Bank should look at ways to ensure that its cheap loans reach households and businesses, Executive Board member Benoit Coeure said.

“Any means to channel ECB liquidity where it is most needed, namely to households and enterprises, is worth considering,” Coeure said in an interview with Slovakia’s Hospodarske Noviny newspaper published by the Frankfurt-based ECB today. Looking into whether the ECB’s funding operations should be better targeted to the financing of the real economy, and particularly of small and medium-sized enterprises, deserves further thought, “even though the implementation would obviously be difficult,” he said.

The ECB has lent banks more than 1 trillion euros ($1.24 trillion) for three years at its benchmark rate, which it cut to a record low of 0.75 percent last month. So far, there’s little evidence that banks are lending the cash on. Coeure said the main reason for that is weak demand for credit, and the full impact of the loans “will be seen only when the economy recovers.”

Coeure reiterated ECB President Mario Draghi’s Aug. 2 announcement that the central bank may buy government bonds to bring down yields in countries such as Spain and Italy, and that further non-standard policy measures are also under consideration.

He said while the ECB is in close contact with other central banks “there is no specific need for ‘concerted global intervention’.”

Asked about plans to create a single banking supervisor for the euro area under the auspices of the ECB, Coeure said he favors a system covering all banks “with centralized decision-making but decentralized implementation, tapping the skills and knowledge of national supervisory authorities.”

He also said he doesn’t favor saving all banks at any cost, and that “failed banks should be resolved, with shareholders taking their fair share of losses.”

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