ECB's Coeure sees G20 coordination emerging market currencies
Benoit Coeure, member of the Executive Board of the European Central Bank (ECB), attends a Lamfalussy Lectures Conference in Budapest, Hungary February 1, 2016. REUTERS/Laszlo Balogh
PARIS (Reuters) - Weakness in emerging market economies risks triggering further depreciation of their currencies and will be addressed in a coordinated manner, ECB Executive Board member Benoit Coeure said on Monday.
Speaking on French TV BFM Business, Coeure the issue would be up for discussion when finance ministers and central bankers from the Group of 20 economic powers meet in Shanghai on Feb. 26-27.
"Given the difficulties that big emerging market countries are having, there's a risk that their currencies will keep weakening," he said.
"That's an issue for global coordination, and will be discussed in Shanghai in 10 days," Coeure added.
Despite the appreciation of the dollar, the euro zone's trade-weighted exchange rate has risen by about six percent since reaching lows in April 2015 largely as emerging market currencies have weakened.
Coeure said the ECB would not let market pressures dictate monetary policy with financial markets anticipating that it will enlarge monetary easing next month, possibly by cutting the deposit rate deeper into negative territory.
European stock markets fell to 16-month lows on Monday with concerns about global growth and the impact of negative interest rates stressing financial sector shares.
Though European banks had improved their balance sheet strength in recent years, they were not finished, Coeure said.
"Banks need to keep building equity to show they are strong while also explaining how they are changing their business models," he said.
While there were no undisclosed "holes" in bank balance sheets, they needed to be clear in their handling of bad loans. "In any case, it will be several years to get rid of bad loans."
(Reporting by Leigh Thomas; editing by Michel Rose)
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