MNI POLICY: ECB Must Mitigate Low Rates Side Effects: Villeroy

By David Thomas

     PARIS(MNI) - The European Central Bank must be attentive to the effects of

negative interest rates on banks, Bank of France Governor Francois Villeroy de

Galhau said Thursday, echoing comments the previous day by ECB President Mario

Draghi.

     Draghi's remarks, also in a speech, that the ECB should seek to preserve

the favourable effect of negative interest rates on the economy, while

mitigating side effects, has been interpreted by some as a suggestion that the

Bank could consider measures such as a tiered deposit rate.

     "Mario Draghi rightly stressed that we need to further monitor the bank

lending channel and to reflect on possible measures that we can take to preserve

the favourable implications of negative rates for the economy, while mitigating

the possible side effects," Villeroy said, in a speech at a Bank of France

Conference.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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