–Adds Comments On The Liquidity Available To Eurozone Banks

FRANKFURT (MNI) – The European Central Bank will continue to ensure
that banks in the Eurozone do not face liquidity constraints, its
president Jean-Claude Trichet said Thursday.

“The provision of liquidity and allotment modes for refinancing
will continue to ensure that Eurozone banks are not constrained on the
liquidity side,” Trichet said, reading from the introductory statement
at the bank’s monthly press conference in Frankfurt.

Non-standard actions by the bank will continue but “are by their
construction temporary in nature,” Trichet said.

Trichet dismissed comments by the head of the International
Monetary Fund, Christine Lagarde, calling for a recapitalisation of
banks in Europe.

Although it is “absolutely essential that [the banks] be as solid
as possible,” Trichet said he saw no interest in “dramatizing the
situation on the basis of analyses that are not methodologically correct
in our view.”

He also appeared to disagree with a statement made by ECB Governing
Council member Luc Coene last week, in which the governor of the Belgian
National Bank said that liquidity was “the first problem” in Europe
because uncertainty had increased banks’ wariness of lending to each
other.

“Liquidity in Europe is a false problem,” said Trichet. “We stand
ready to provide liquidity as we have done in the past, taking into
account the needs of the banking sector.”

He added: “There is no liquidity issue for the banking sector of
the Eurozone as a whole. We are supplying unlimited liquidity at fixed
rates.”

Moreover, the volume of liquidity the ECB can provide has room to
increase substantially, Trichet suggested. Eurozone banks have eligible
collateral totaling about E13 trillion, which they can present to the
ECB in return for loans, while the liquidity being demanded from the
bank is only in the region of E500 to E550 billion, he noted.

“Liquidity in the euro area for the banking sector is not an issue
at all,” the ECB president asserted.

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