UPDATE 3-ECB's Nowotny: No need to bypass banks on credit

* Nowotny sees no need for ECB to bypass banking channel

* Contrasts recent comments from Bundesbank's Weber

* Too early to think about adding to covered bond plan

* ECB to publish covered bond purchase program details

* Mersch says deflation risk has decreased

* Mersch: too early to worry about high overnight deposits (Adds Mersch)

By Boris Groendahl and Michele Sinner

VIENNA/LUXEMBOURG, July 6 (Reuters) - European Central Bank policymaker Ewald Nowotny appeared at odds with his Bundesbank counterpart Axel Weber on Monday, insisting there was no need to bypass the banking channel to ensure credit reaches firms and consumers.

He also said it was too early to consider scaling up the ECB's 60 billion euro ($84 billion) program to buy mortgage- and public sector-backed debt. That program started on Monday and the first details on purchases are due on Tuesday.

Nowotny, who heads Austria's central bank and sits on the ECB's Governing Council, said he saw "no necessity" to bypass banks to kick start the flow of credit. "For banks, it is in their own interest to provide credit," he told a news conference.

Data continue to stoke concerns the finances of firms and consumers are being strangled as banks rein in lending. Banks hoarded a record amount of cash at the ECB, figures revealed on Monday and growth in lending has slowed to an all-time low. For more see [ID:nFAT004776] and [ID:nLU302287].

ECB President Jean-Claude Trichet again urged banks to lend over the weekend. [ID:nL5643198]

Nowotny's comments also put him at odds with authorities in Germany, where Finance Minister Peer Steinbrueck said over the weekend that the government would sit down with the Bundesbank and come up with a solution unless there was a turnaround from banks. [ID:nL5164229]

Bundesbank President Weber has raised the prospect the ECB could circumvent the banking sector altogether if lending doesn't free up.

Overnight deposits at the ECB spiked after the bank poured 442 billion euros into money markets on June 25. Nowotny shrugged off worries that banks may keep hoarding the funds, rather than lend them on.

"A strategy of taking money from the ECB and then putting it back into the deposit facility can only be short term," he said.