Europe must do more on small business loans: ECB's Coeure

FRANKFURT Thu Apr 25, 2013 3:04am EDT

Benoit Coeure, Treasury Chief Economist, reacts as he speaks the day after France nominated him as a candidate for the executive board of the European Central Bank at the Bercy Finance Ministry in Paris November 25, 2011. REUTERS/Charles Platiau

Benoit Coeure, Treasury Chief Economist, reacts as he speaks the day after France nominated him as a candidate for the executive board of the European Central Bank at the Bercy Finance Ministry in Paris November 25, 2011.

Credit: Reuters/Charles Platiau

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FRANKFURT (Reuters) - European institutions should find ways to ease funding strains small euro zone companies, European Central Bank Executive Board member Benoit Coeure told an Austrian newspaper in an interview.

Small- and medium-sized enterprises (SMEs) in some euro zone countries are struggling to get funding from banks, which are reluctant to take on further credit risk as they try to adapt to new regulatory standards for capital and liquidity levels.

The ECB is increasingly concerned about this development as SMEs are key to get the currency bloc back to growth. Coeure told Der Standard SME loans costs were still diverging strongly across the euro zone.

"European institutions should find ways to address this problem and we are also working on it. But the ECB cannot solve all problems and is bound to its mandate," Coeure was quoted as saying on Thursday.

With regards to the planned banking union, Coeure said the EU Commission would have to decide whether a treaty change was necessary to establish a common resolution fund to wind down non-viable banks.

As a first step towards such a union, the ECB will start supervising euro zone banks from March next year and Coeure said leaving it there would be like stopping halfway when crossing a river.

"It would lead to continuous fragmentation in the euro zone, strain bank lending and investments and thereby drive down growth," Coeure said.

(Reporting by Eva Kuehnen and Georgina Prodhan; editing by Patrick Graham)

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