ECB wants to be sure any new loans boost economy, not subsidise banks
FRANKFURT Dec 5 (Reuters) - European Central Bank President Mario Draghi said on Thursday the ECB was not going to issue new long-term, low interest loans to banks until it was sure the money would be used to bolster the economy.
Draghi told a news conference a previous round of loans - or LTROs - had come at a time of credit crisis but that this was not the case now.
He also said that banks had used the money for buying government bonds and that not much of the lending made it into the economy.
"So if we are to do an operation similar to the LTRO, we're going to make sure this is going to be used for the economy," Draghi said.
"(We) will make sure this operation is not going to be used for subsidising capital formation by the banking system."
Loans to the private sector shrank by 2.1 percent in October, the biggest fall on record, ECB data showed last month, in a sign that the ECB's record low interest rates are not feeding through to the real economy.
The ECB flooded the banking system with more than 1 trillion euros by handing out two batches of 3-year loans at the end of 2011 and early 2012 to ease banks' funding strains.
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