ECB official proposes large bank infusions to boost lending

11/26/2008 | Wall Street Journal, The

Lorenzo Bini Smaghi, a member of the European Central Bank's executive board, is urging governments to make substantial capital injections into financial institutions. "European governments have committed not to let any bank fail," Bini Smaghi said. "Such a commitment, to be credible, must be followed by a programme of bank recapitalisation." A reluctance by banks to lend to one another is prohibiting cuts in interest rates from filtering through to the broader economy.

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