‘Central banks can support lenders’

ECB President Jean Claude Trichet says that national central banks could support lenders through emergency liquidity programs if needed.

“National central banks of the eurosystem can temporarily provide emergency liquidity assistance against eligible collateral,” Mr Trichet said in a letter to Andreas Moelzer, a member of the European Parliament, published on the ECB’s website yesterday.

It’s “an exceptional crisis- management tool to support illiquid, but solvent financial institutions”, he said. European officials are seeking ways to contain the Greek debt crisis from spreading after earlier this month authorising an €8.7 billion loan payout to the country. While the ECB has provided the region’s banks with unlimited liquidity, Trichet has called on governments to step up efforts to cut budget deficits and help restore bank lending.