ECB's Kranjec sees higher borrowing costs for euro zone banks

LJUBLJANA Tue Apr 6, 2010 1:19pm BST

Related Topics

LJUBLJANA (Reuters) - Euro zone banks' borrowing costs could increase later this year when they have to pay back more than half a trillion euros to the European Central Bank, Governing Council member Marko Kranjec said on Tuesday.

"Due to already announced measures of the European Central Bank which will stop one-year lending without limits, the maturity of (funding) sources will shorten and banks will have to seek funding on the markets," Kranjec told a news conference.

"Due to competition of states and debtors it can happen that banks will have to pay higher prices for those loans," said Kranjec, who is also the governor of Slovenia's central bank.

The ECB handed out three lots of one-year loans to banks last year to ease problems during the financial crisis. Banks must pay back 442 billion euros at the start of July, 75 billion at the end of September and another 97 billion on December 23.

The deputy governor of the Bank of Slovenia, Andrej Rant, meanwhile, added his voice to the debate on whether the International Monetary Fund should be involved in any European Union-led bailout for Greece.

"Without doubt the International Monetary Fund has technical expertise that can be useful in such a case," Rant told the same news conference.

"It is very clear that it (EU and IMF support) can only materialise after all other possibilities are exhausted," he said.

"The estimate on that will be given by each state of the European Union separately. There are no signs that would demand such a support at this moment," he added.

(Reporting by Marja Novak; Editing by Susan Fenton)

FILED UNDER: