German savings bank group warns of price bubbles -paper

BERLIN, July 20 Sun Jul 20, 2014 6:05am EDT

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BERLIN, July 20 (Reuters) - The head of Germany's Sparkassen savings banks association fears that the European Central Bank's expansive monetary policy stance could create price bubbles, he told a German paper, without specifying which markets were causing him concern.

"Because so much money is coming from all angles, we are once again seeing that irresponsible risks are being taken," Georg Fahrenschon was quoted as saying in an interview with Welt am Sonntag.

In Germany, traditionally a nation of savers, the decision by the ECB to push interest rates to record lows in June has led to fears that cheap credit could fuel real estate and stock market bubbles. The media has seized on rising house prices as evidence of this.

"Risks are being incorrectly priced, and the danger is growing that bubbles will be created and then pop," Fahrenschon said.

Bundesbank chief Jens Weidmann said last week that the ECB should tighten policy as soon as it can.

Fahrenschon also said that Europe should take a more U.S.-style approach to bank supervision. "Instead of subjecting every cooperative and savings bank to European rules, we should just concentrate on the large and risky institutes," he said. (Reporting by Victoria Bryan; editing by Jane Baird)

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