BRUSSELS (Reuters) - Keeping monetary policy accommodating for too long could create new imbalances and make many banks dependent on central bank funding, European Central Bank governing council member Nout Wellink has said.
Wellink told Belgian business daily L'Echo in an interview published on Saturday that the proposed tougher new laws on banks' capital ratios would not compromise growth. Wellink, the Dutch central bank governor, is also chairman of the Basel Committee on banking supervision.
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Wellink said the ECB's exit from its non-conventional measures that have allowed banks to draw on ample liquidity would depend on the normalisation of the financial markets.
"New imbalances could arise if monetary policy remains accommodating for too long," he said.
"Crises are generally the result of weak fundamentals and accumulated financial imbalances."
New liquidity rules, which have been put forward to prevent future crises, would not hurt short-term growth but rather would enforce long-term stability, which would boost long-term economic prospects, Wellink added.
He called for the Basel III standards to be applied and made mandatory.
Wellink said he did not believe that separating investment from retail banking, as some proposed in Britain and the United States, would be beneficial.
"To protect savings, it is not necessary to separate investment banking activities but to establish that the banks have funds in line with the risk they take," he said.
(Reporting by Robert-Jan Bartunek, editing by Marcin Grajewski/Ruth Pitchford)