FRANKFURT (Reuters) - It is too early to discuss a further stimulus package by the European Central Bank in response to a worsening of financial conditions, ECB Vice President Vitor Constancio told Reuters on Tuesday.
Less than three months after the ECB cut rates and expanded its money-printing programme, some investors are hoping the bank could ease policy further, for example by buying equities.
But even as the ECB’s own Financial Stability Review (FSR)highlighted worsening financial conditions in the euro zone, Constancio dismissed such speculation.
“We have taken important measures in March so it’s too soon to start thinking about new packages,” Constancio told Reuters after presenting the ECB’s bi-annual FSR.
Since the November review, the ECB cut one of its interest rates twice and increased the size and scope of its asset-purchase programme to include corporate bonds from next month.
It also launched a scheme, due to start in June, which will see the ECB pay banks to take its money, provided they pass it on to the economy.
“Let us see what the effects are. These sorts of measures take time and some have not even been implemented,” Constancio added.
“Of course we are always attentive to some external developments that could happen but, with that exception, now we have to implement and see the results.”
In the FSR, the ECB said financial conditions had become “more challenging” in the past six months, raising risks to the euro zone’s moderate recovery.
It also said risks to the euro zone’s financial health had increased over the past six months, with new market turmoil and weak profits for banks and insurers emerging as the key sources of potential trouble.
Among risks facing the banking sector, the ECB emphasised the high level of bad loans in some countries and it called for lenders and authorities to do more to bring this down.
Speaking to Reuters, Constancio stressed that banks had sufficient provisions and capital but needed to work off bad loans faster.
The ECB has launched a task force to look into the issue of non-performing loans, one of its key priorities for the year.
“We have gathered more information ... so that the supervisor can lead the banks to take action and put pressure for more measures in this field,” he said.
“We hope we can indeed solve the problem quicker than just waiting to see what the banks will do on their own.”
The ECB’s chief supervisor Daniele Nouy said on Tuesday fresh proposals on dealing with a long legacy of bad loans were coming.
Reporting by Francesco Canepa; Editing by Richard Balmforth