By Simon Miller
The head of the European Central Bank Mario Draghi has told members of the European Parliament that liquidity actions had not gone into the economy fast enough.
Speaking to the European Parliament's Committee for Economic Affairs, Draghi said that the two long-term refinancing operations (LTROs) in December and February had yet to yield greater lending activity and that the process would take some time - available data suggesting that banks were parking the money on deposit to the central bank.
He commented: "We had hoped the LTRO money would go faster into the real economy. We are confident that central bank liquidity has come very close to the real economy. Of course, this does not mean that this will by itself boost lending to firms and households."
However, he added that it was encouraging that a very large number of small banks had participated in the LTROs.
"Small banks are best placed to refinance the real economy, in particular small- and medium-sized firms which are the biggest generator of employment in the economy," he said.
The ECB's quarterly survey on bank lending found that a tightening of credit conditions had declined substantially in the first three months of the year with banks expecting the trend to continue into the second quarter.
Draghi said the results were "positive" and added that the impact of the sovereign dent crisis on funding conditions had decreased, although the effects were still to be felt.
He continued: "The LTROs have been quite timely and all in all successful and if the only thing we managed was to buy time, then that is an extraordinary success. Buying time is not a minor achievement."