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UPDATE 1-ECB's Weber: ECB has made liquidity decisions for Q1

Published 01/25/2010, 12:29 PM
Updated 01/25/2010, 12:33 PM

* Weber says liquidity decisions for Q1 have been made

* Rates appropriate, recovery only moderate

* Banks must use profits to strengthen balance sheets

(Adds quotes, details)

FRANKFURT, Jan 25 (Reuters) - The European Central Bank has already made all the important decisions regarding its liquidity measures through until the end of March, ECB Governing Council member Axel Weber was quoted as saying on Monday.

Weber also told the German daily Boersen-Zeitung inflation risks in the euro zone are only slight and that the interest rates are appropriate.

"In December we conducted the last 12-month tender, which was indexed instead of a fixed interest rate, and the last 6-month tender will be in March," Weber told the paper.

"With those decisions, we have, in my mind, made all the necessary decisions for the first quarter."

The removal of measures supporting the financial markets will be orderly, gradual and continuous, Weber added, but added the steps depend not on timing, but on the recovery of financial markets.

Weber also said commercial banks have yet to understand what will be required of them after the crisis, when new regularions come into effect.

"We have decided to raise own capital requirements in general," Weber said. "My impression is, however, that banks have not yet understood correctly what kind of requirements will be asked of them."

Banks should use their recent profits to strengthen their balance sheets, and said not doing so would have consequences.

"If they do not do this, they will lose all credibility, were they to ask for an extension before the introduction of new regulations," he said.

"I have no understanding if they do not use these crisis year 2009 windfall profits for the strengthening of the foreseeable requirement of higher own capital."

He said the euro-zone was likely to see only moderate economic growth .

"We see only a moderate recovery in the euro zone and small inflation risks on the monetary policy horizon," he said.

Weber also added to analyst expectations the ECB would not touch its interest rate, currently at a record low fo 1.0 percent, in its next meeting on Feb. 4.

"Interest rates are appropriate at the moment."

The development of rates later this year was dependent on inflation risks, he added.

Weber also said Greece should sort out its problems on its own and not expect help from other euro-zone countries. (Reporting by Sakari Suoninen; editing by Ron Askew)

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