Not ECB's job to fix "addicted banks" problem-Draghi

ROME Fri Oct 1, 2010 12:04pm EDT

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ROME Oct 1 (Reuters) - The serious problem of banks that have become too dependent on liquidity provided by the European Central Bank must be resolved by national authorities and not by the ECB, Governing Council member Mario Draghi said on Friday.

Speaking at a conference in Rome, Draghi warned that many euro zone banks are much weaker than appears from their balance sheets because the very low level of interest rates understates the worsening of their financial situation.

"The problem of addicted banks should not be addressed by the ECB but by financial authorities," Draghi said.

He added that unless the problem is resolved "we will have these zombie banks in the euro area for some time".

In other remarks, Draghi said that in judging when to withdraw its emergency measures to help markets, the ECB must avoid the risk of leaving too much liquidity for too long, which could sow the seeds of a future crisis.

On the other hand the ECB is bearing in mind that the situation of the real economy has "improved but remains fragile".

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