October 3, 2016 / 4:20 PM / a year ago

ECB's Mersch warns further rate cuts could backfire

FRANKFURT, Oct 3 (Reuters) - Charging banks even more to park their money with the European Central Bank could backfire if the damage to the banking sector outweighs the benefit for borrowers, a member of the ECB’s Executive Board said on Monday.

“There is a limit to how low interest rates can go -- the point at which the costs of lower rates incurred by the banking sector outweigh the benefits,” Yves Mersch said.

“(The current) level I would still deem to be ‘mildly negative’ but I would shy away from moving into ‘wildly negative’ territory. Cutting interest rates even more would come with increasing risks, as reactions to such cuts might not always be linear,” he added.

Reporting by Francesco Canepa; Editing by Catherine Evans

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