UPDATE 1-ECB’s Trichet-US bank reforms go in right direction

* ECB’s Trichet says U.S. bank reforms in right direction

* Hopes Bernanke reconfirmed as Fed chief

* Says economic recovery in Europe moderate
(Adds background, quotes)

DAVOS, Switzerland, Jan 26 (BestGrowthStock) – Proposed U.S. bank
reforms are a step in the right direction, European Central
Bank President Jean-Claude Trichet was quoted as saying on
Tuesday, although international coordination is also
important.

In an interview with The Wall Street Journal, Trichet said
U.S. plans to limit banks’ size and trading activities were
“relevant and interesting,” and the ECB was examining them with
great care.

“They go in the same direction of our own position, namely
ensuring that the banking sector focuses on financing the real
economy, which is its key role,” he said.

“There is naturally an international coordination mechanism
at the level of the G20 and the Financial Stability Board,
where proposals should be coordinated globally to ensure that
there are no loopholes in our integrated global financial
system.”

Trichet said he holds Federal Reserve Chairman Ben
Bernanke, who faces a reconfirmation hearing before U.S.
lawmakers, in great esteem.

“I do hope, and am confident, that he will be confirmed by
the U.S. Senate,” he said.

Democratic Senate leaders have been pressing for support
for Bernanke, aiming for a vote as early as Thursday to confirm
him for a second term as chairman of the Fed.

MODERATE RECOVERY

Trichet also confirmed he expects a modest economic
recovery for Europe, in line with forecasts that the ECB will
keep interest rates at the current record low of 1 percent
given uncertain growth prospects and low inflation.

But the ECB has started to phase out crisis lending
measures which have flooded money markets with liquidity since
late 2008, pushing bank-to-bank credit costs to record lows.
(EURIBOR=: )

Trichet said extra lending was designed to encourage banks
to lend to firms and households, and urged bank to shore up
their balance sheets.

“All what central banks decided to do as regards
non-conventional measures was done with the sole goal of
permitting the financial sector to do its job, which is
financing appropriately the real economy,” he said.

Trichet also defended the independence of central banks,
saying this was important now “more than ever.”

He repeated his support for Greek plans to cut the budget
deficit to below 3 percent of gross domestic product as early
as 2012.

“I trust it is not only realistic, but also necessary in
the present demanding circumstances to take the right decisions
to meet the goal. I approve the ambition. I approve the 2012
deficit target of below 3 percent,” he said.

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UPDATE 1-ECB’s Trichet-US bank reforms go in right direction