Eurozone banks should brace for the end of exceptional credit measures the European Central Bank put in place to help the economy survive the global slump, influential director Axel Weber said Thursday. "Given recent developments on financial markets and resulting stabilisation of bank refinancing, it would not be ... appropriate to maintain for too long" the unlimited supply of cash to commercial banks, Weber said, according to the text of a speech given in Berlin.
Weber is a leading member of the ECB governing council and also governor of the German central bank. After the US investment bank Lehman Brothers collapsed in September 2008, sending shock waves through the global financial system, the ECB decided to provide as much cash as commercial banks needed on favourable lending terms.
Because a majority of eurozone businesses rely on financing from banks, the ECB sought to ensure this key conduit did not freeze up. Now, "banks should prepare for the progressive withdrawal of medicine administered by central banks," Weber said. "Surviving thanks to cash injections is not a sustainable option for the future and certainly not a sustainable business model," he stressed. Weber gave no indication of when the winding down of exceptional measures might begin.
Comments
Comments are closed.