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Banks have complained that ultra-low ECB rates are eating into
their lending margins, particularly in countries where cash is
abundant and competition fierce such as Germany.
Peter Praet acknowledged the banks' complaints but said the ECB
would stick to its ultra-easy policy, which includes a charge on
banks' excess deposits, until it brings inflation back to its
target of almost 2 percent.
"The ECB will preserve its accommodative stance until inflation
returns to our aim," Praet told an event in Madrid.
"Very low interest rates will probably prevail for an extended
period of time," he added.
Praet said the ECB would continue to monitor the health of the
banking sector, noting a protracted period of low profits would
make banks less able to lend by hampering their ability to set
aside capital.
But he argued the key to restoring bank profits did not lie with
monetary policy.
"A durable improvement in the prospects of the euro area banking
system requires further efforts outside the realm of monetary
policy," he added.
"These include, most notably, a swift and stringent completion
of banking union and additional adjustments in the banking
sector towards greater cost efficiency and business models that
remain viable in the new regulatory and macroeconomic
environment."
(Reporting By Sarah White; Writing by Francesco Canepa and
Balazs Koranyi Editing by Jeremy Gaunt)
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