Knot says ECB should spin off banking watchdog in long-term -paper

FRANKFURT, March 21 Fri Mar 21, 2014 11:33am EDT

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FRANKFURT, March 21 (Reuters) - The new European banking watchdog being set up under the auspices of the European Central Bank should be spun off into an independent institution eventually, ECB Governing Council member Klaas Knot told Germany's Handelsblatt.

Centralising banking oversight for euro zone lenders at the ECB is part of a broader move towards closer integration of the financial sector aimed at restoring investors' trust and averting any future crisis.

Knot, who is also governor of the Dutch central bank, said that it made sense to use the ECB's credibility to build up a European banking watchdog and that the crisis left little alternative to such a model. But over the longer term this should change, he said.

"Once it is established, at some point in the future we could again think about moving supervision out of the ECB and launching an independent institution," Knot was quoted as saying by online newspaper Handelsblatt Live on Friday. (Reporting by Eva Taylor; Editing by Hugh Lawson)

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