Euro zone private sector loans contract again in April -ECB

FRANKFURT Wed May 28, 2014 4:20am EDT

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FRANKFURT May 28 (Reuters) - Lending to households and firms in the euro zone declined further in April and money supply growth slowed markedly despite the European Central Bank's ultra-loose monetary policy stance.

The ECB has cut interest rates close to zero, pumped extra liquidity into the banking system and widened the pool of assets it accepts in return for funding, but the measures have so far not managed to unclog lending to the real economy.

The central bank is now putting the bloc's top banks through a thorough review of their balance sheets to weed out soured loans, update collateral valuations and adjust capital so that they can lend more freely in future.

However, loans to the private sector fell by 1.8 percent in April from the same month a year earlier, ECB data released on Wednesday showed, after a contraction of 2.2 percent in March.

Euro zone M3 money supply - a more general measure of cash in the economy - grew at an annual pace of 0.8 percent, slowing down from a downwardly revised 1.0 percent in March.

(Reporting by Eva Taylor and Paul Carrel)

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