ECB's Noyer Says Money-Market Tensions Persist

By Keiko Ujikane

Nov. 18 (Bloomberg) -- European Central Bank council member Christian Noyer said money-market tensions persist 15 months after the global credit crisis began, making it hard for companies to obtain funding.

``More than a year later, tensions on money markets are still with us,'' Noyer said at the Paris Europlace Financial Forum in Tokyo today. ``These tensions are also affecting non- financial corporations and, more broadly the financing of the economy.''

Writedowns and losses totaling $965.6 billion at financial institutions triggered a surge in the cost of credit since August 2007, cutting off access to capital for consumers and companies. The euro region fell into a recession last quarter, and the Frankfurt-based ECB lowered its benchmark interest rate to 3.25 percent on Nov. 6, the second cut in less than a month.

``Needless to say, restoring liquidity remains a pressing priority,'' said Noyer, who is also governor of the Bank of France. ``Inter-bank markets have recently shown modest signs of improvements. Yet there is still some way to go.''

The euro interbank offered rate, or Euribor, that banks say they charge each other for loans declined to 4.191 percent yesterday, the lowest level since the credit squeeze began July 2007. That's still 94 basis points above the European Central Bank's 3.25 percent key interest rate.

Central banks' actions taken to date, such as widening the collateral they accept for refinancing and broadening the range of counterparties, ``should greatly contribute to restoring confidence and a smooth functioning of money markets,'' he said.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net