ECB policy mainly having positive impact on banks: Villeroy

PARIS (Reuters) - The European Central Bank's monetary stimulus has had a mainly positive impact on euro zone banks, but has its own risks, ECB governing council member Francois Villeroy de Galhau said on Monday.

Investors should thus lower their expectations for returns from the sector, Villeroy told a news conference.

Higher lending volumes have helped offset the impact of low interest rates squeezing net interest margins. Meanwhile, lower rates have also improved borrowers credit profiles, lowering banks' cost of risk while also lowering their own funding costs.

"I would like to point out that the Eurosystem's monetary policy overall had a positive impact on euro zone banks' profitability and solvency in 2015," said Villeroy, who was presenting the annual report of the ACPR French financial sector regulator, which he heads in his role as the governor of the Bank of France.

The ECB's ultra loose monetary policy has fueled concerns that it may weaken banks especially through negative deposit rates, effectively charging banks that park cash at the central bank.

Villeroy said that regulators would keep an eye on banks' business models to make sure that they are capable of coping in a low interest rate environment.

(Reporting by Maya Nikolaeva and Leigh Thomas, Editing by Brian Love/Jeremy)

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