MILAN, Jan 29 (Reuters) – The support measures put in place by governments and central banks to help the banking system are becoming less necessary and their withdrawal must be timely, a top European Central Bank policymaker said on Friday.
In a speech on bank lending, Executive Board member Lorenzo Bini Smaghi also said banks were interpreting a global regulatory overhaul in ways that restricted lending, and that he was worried about criticism in the United States of the Federal Reserve.
“It is crucial to prevent the banking system making prolonged use of support measures, developing a sort of ‘dependence’,” he said, and added a premature withdrawal of support could sharply reduce financial gearing putting economic recovery at risk.
The exact timing of exit depends on the strength of the economy, he said.
“With improving conditions in the economy and the financial markets, supportive measures by governments and central banks have progressively less ‘raison d’etre’.”
He said later he saw the euro-zone recovery as “slow, gradual and oscillating”.
