Bloomberg News

Nowotny Says There’s ‘Ample Room’ for Additional Bank Liquidity

October 03, 2011

Oct. 3 (Bloomberg) -- European Central Bank Governing Council member Ewald Nowotny reiterated he may support re- introducing 12-month loans for banks.

“There is ample room for additional liquidity for the banks because the banks have enough that they could give the central banks as a security,” Nowotny said at a conference in Vienna today. “It’s a problem that longer-term liquidity is very difficult to achieve in the markets.”

The ECB is providing banks with unlimited liquidity for up to six months against eligible collateral as governments struggle to restore investor confidence in the 17-member euro region. The debt crisis has infected the banking system, making financial institutions wary of lending to each other and pushing overnight deposits with the Frankfurt-based central bank last week to the highest in more than a year.

The ECB, which last offered a 12-month loan in December 2009, has been forced to purchase government bonds to prevent the crisis from spreading to larger euro nations.

Nowotny, who is also head of Austria’s central bank, said the bond measure is “not a program of quantitative easing” and that it’s “limited time-wise” to “overcome specific market imperfections.”

--Editors: Simone Meier, Jennifer M. Freedman

To contact the reporters on this story: Gabi Thesing in London at gthesing@bloomberg.net; Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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