October 4, 2016 / 9:21 AM / a year ago

ECB's Praet says low interest rates challenging for banks if they persist

MADRID (Reuters) - A prolonged period of low interest rates could present deeper challenges for banks, the ECB’s chief economist Peter Praet said on Tuesday, though he added the central bank’s monetary policy had been helpful for the sector overall.

“Our assessment is that at this stage monetary policy has supported banks’ profitability,” Praet told a banking conference in Madrid, arguing it was not up to the European Central Bank to shore up bank profits.

Praet said the ECB’s interventions were finally trickling down to the real economy, through normalized lending conditions for instance, but he added that “on the negative side, the profitability of the banking sector is weak, too weak.”

“The longer low interest rates persist, the greater the challenges for the banking sector,” he said.

Reporting by Sarah White, Editing by Amanda Calvo

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