FRANKFURT (Reuters) - Commercial banks would have less reason to get back into shape were the European Central Bank to engage in too much monetary policy easing, ECB Executive Board Peter Praet said on Monday.
Speaking at a conference in Brussels, Praet said the ECB had been able to counter the risk of disorderly deleveraging, but he warned against the central bank going too far.
“Bold monetary policy measures may be effective in the short run, but they also bear the risk of reducing incentives for banks to restructure balance sheets,” Praet said in the text of the speech, posted on the ECB’s Internet site.
“We are aware of these risks,” he added.
Central banks should not stoke higher inflation during the deleveraging process, Praet also said, and added this would undermine central bank credibility and reform drives in the longer term.
Reporting by Sakari Suoninen; Editing by Paul Carrel