Bloomberg News

Paramo Says ECB Doesn’t Need to Add More Liquidity for Now

November 25, 2011

(Updates with Mersch comments from fourth paragraph.)

Nov. 25 (Bloomberg) -- European Central Bank Executive Board member Jose Manuel Gonzalez-Paramo said the ECB will offer banks more liquidity if necessary, though it doesn’t see a need to do so for now.

“If we see the need to do more, we will do so,” Gonzalez- Paramo said at an event in London today when asked whether the ECB should offer longer-term bank loans or ease collateral rules. “This is not our assessment at the moment.”

The ECB is already lending banks as much money as they need at its benchmark rate for periods of up to a year. The central bank, which cut rates this month, is also buying government and covered bonds in an attempt to reduce tensions on financial markets roiled by the sovereign debt crisis.

ECB council member Yves Mersch said the bank would provide more liquidity if needed to avoid a credit crunch.

“I can imagine very well that if an exceptional measure would be demanded from the European system of central banks it would be in this area,” Mersch told Luxembourg radio in an interview today. “We would look for possibilities to contribute to avoid that in a situation of stronger growth decline we won’t also have a credit crunch.”

Gonzalez-Paramo said it’s not a “lack of liquidity” that is the problem as “markets are awash with liquidity.” Any tightness is only in “some market segments,” he added.

--Editors: Craig Stirling, Matthew Brockett

To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net

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


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