FRANKFURT, Feb 9 (Reuters) - The European Central Bank has warned countries against setting up their own money market clearing houses, saying it runs the risk of fragmenting interbank lending.
In a legal note on Denmark's plans to offer Danish-based banks state guarantees on certain types of new debt, the ECB issued a number of warnings.
"The ECB notes that uncoordinated decisions to guarantee interbank deposits in some member states should be avoided as they may involve a fragmentation of money markets," it said in legal response published on Monday and dated Jan. 26.
"EU Member States have to act in a coordinated manner to avoid significant differences in national implementation having a counterproductive effect, creating distortions in global banking markets."
A number of EU countries have decided to go it alone with attempts to get money markets going again.
Austria set up a government backed clearing house late last year, while Italy laid out plans for a similar set up last month, in which it said banks would be able to enter into deals anonymously as long as the Bank of Italy had checked they have suitable collateral as insurance. (For full document go to ECB website http://www.ecb.int/ecb/legal/pdf/en_con_2009_6_f_sign.pdf) (Reporting by Marc Jones)