28 September 2015

Reuters: Too soon to talk about ramping up QE -ECB's Lautenschlaeger

It is too soon for the European Central Bank to discuss expanding its asset-purchase programme because the euro zone economy is still expected to recover modestly, an ECB executive board member said.

"For me it's too early to talk about concrete measures to broaden QE," Sabine Lautenschlaeger said on the sidelines of an event in Milan. "For the euro area as a whole the basic scenario is still intact with regard to a modest recovery."

After six months of QE, headline consumer price inflation in the single currency area was a paltry 0.1 percent in August, partly due to a slump in the price of oil and other commodities, which mirrored falls in the equity market.

Lautenschlaeger said the ECB should look through such price swings. "We have to look through the recent volatility to see whether the underlying economic factors have changed and that I do not see, so for me it's still to early to talk about (expanding QE)."

The ECB took over supervision of the euro zone's 123 largest banks last year and is in the process of setting individual capital requirements for those lenders as part of its Supervisory Review and Evaluation Process (SREP).

Lautenschlaeger, who represents the ECB's supervisory arm on the bank's board, said many banks will be able to meet the new requirements with capital they already have.

The ECB's Single Supervisory Mechanism has been complaining about uneven supervisory standards and diverging practices across the euro zone.

Lautenschlaeger said an ECB review found that a number of banks under its watch do not comply with best international governance practices, such as separating audit and risk functions.

Full article

Full speech by Lautenschlaeger

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