Govt rescue of central bank could harm credibility: ECB official
A central bank's independence, credibility and ability to conduct monetary policy could be jeopardised if losses on assets mean governments must step in and shore up its finances, a top European Central Bank policymaker said on Wednesday.
By Agencies |
FRANKFURT: A central bank's independence, credibility and ability to conduct monetary policy could be jeopardised if losses on assets mean governments must step in and shore up its finances, a top European Central Bank policymaker said on Wednesday.
"Central banks are not immune to credit risk," ECB Executive Board Jose Manuel Gonzalez-Paramo said in a speech in Frankfurt, referring to losses on collateral accepted from banks.
"If a recapitalisation of the central bank by the government becomes ultimately necessary, it could jeopardise the independence of the monetary authority," he warned.
He added that the performance of rating agencies had raised serious questions and urged less reliance on them in future.
Plans for new liquidity rules for European banks also have be revisited to take into account banks' concerns, he said.
"Central banks are not immune to credit risk," ECB Executive Board Jose Manuel Gonzalez-Paramo said in a speech in Frankfurt, referring to losses on collateral accepted from banks.
"If a recapitalisation of the central bank by the government becomes ultimately necessary, it could jeopardise the independence of the monetary authority," he warned.
He added that the performance of rating agencies had raised serious questions and urged less reliance on them in future.
Plans for new liquidity rules for European banks also have be revisited to take into account banks' concerns, he said.
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