The European Central Bank's record low interest rates are not getting to those who need them most because huge differences in banking conditions across the eurozone, ECB Vice President Vitor Constancio said on Monday.
He said this fragmentation was "severely disrupting" the spread of benefits from the low rates.
The ECB kept rates at a record low of 0.75 percent on Thursday but acknowledged that the eurozone's strains meant those ultra-low borrowing costs were not being passed on to firms and consumers in the bloc's trouble spots.
"At present market fragmentation is severely disrupting the transmission of ECB monetary policy," Constancio said during a speech at London-based think-tank Chatham House.
"In some countries changes in our main interest rates are being passed through by banks but in others, because bank funding is tight, interest rates changes are being passed through hardly at all."
Speaking to reporters after the speech Constancio said one of the things ECB members discussed last week in regards to the fragmentation problem was that recent changes to its lending rules were not being fully utilized by banks in struggling countries.
"The question is that this credit claim program we introduced is not yet fully used in all countries that could benefit from it, so we are working on seeing that it can become more effective."
In his speech Constancio had used the broader problem to highlight the potential benefit of eurozone plans being drawn up to prevent a repeat of current financial crisis.
A key strut of those plans is that alongside its traditional rate-setting role, the ECB will take over the oversight of the eurozone's 120-150 biggest banks and have the power to jump on any smaller one that threatens to trigger system-wide problems.
Propping up and bailing out damaged banks has cost eurozone governments hundreds of billions of euros and pushed some countries' debts to the dangerous levels that has left them vulnerable to kind of debt market attack seen during the crisis.
The plans for the ECB-run watchdog are due to be finalized by the European Commision around the middle of the year, but Constancio stressed the need for them to be complemented by a pan-eurozone system for repairing or winding down troubled banks.
"A final point to note about the SSM (single supervisory mechanism) is that its launch will be associated with a comprehensive review of participating banks' balance sheets."
"This process may have financial implications if impaired assets have to be written down. And this is a further reason why having a Single Resolution Mechanism in place for participating countries is a matter of urgency," Constancio said.
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