AMSTERDAM (Reuters) - European Central Bank Governing Council member Klaas Knot said on Friday there was “little wrong” with Eurogroup chair Jeroen Dijsselbloem’s recipe for dealing with future euro zone banking crises, a newspaper reported.
Dijsselbloem, the head of the euro zone’s finance ministers and like Knot a Dutchman, said on Monday the rescue program agreed for Cyprus - the first to impose a levy on bank deposits - would serve as a model for future crises.
Those comments - which Dijsselbloem later rowed back on -prompted a market selloff and led two other ECB policymakers, including executive board member Benoit Coeure, to say on Tuesday that Cyprus was a unique case.
But Knot, who sits on the bank’s main decision-making body, said: ”There is little wrong with Dijsselbloem’s remarks.
“The content of his remarks comes down to an approach which has been on the table for a longer time in Europe. This approach will be part of the European liquidation policy.”
Knot’s comments, reported by Dutch daily Het Financieele Dagblad, were accurate, a spokesman for the central banker said.
They threaten to further muddy the waters over an issue that continues to divide monetary policymakers and senior politicians in the currency bloc - who should foot the bill for cleaning up the region’s underperforming banks.
In a speech on Thursday night in Amsterdam, Knot said euro zone banks needed to clean up their balance sheets by winding down loss-making operations.
“Firstly, there has to be transparency about losses in the banking sector. Secondly, banks have to wind down their loss-making operations,” Knot said.
Under the Cyprus bailout, bank depositors whose accounts hold more than 100,000 euros face heavy losses.
Reporting by Ivana Sekularac and Gilbert Kreijger; Editing by John Stonestreet