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ECB's Knot backs Dijsselbloem comments on bank rescues

President of Dutch central bank De Nederlandsche Bank (DNB) Klaas Knot arrives for the Frankfurt Finance Summit in Frankfurt March 19, 2013.
President of Dutch central bank De Nederlandsche Bank (DNB) Klaas Knot arrives for the Frankfurt Finance Summit in Frankfurt March 19, 2013.

AMSTERDAM (Reuters) - European Central Bank Governing Council member Klaas Knot said on Friday there was "little wrong" with Eurogroup chair Jeroen Dijsselbloem's recipe for dealing with future euro zone banking crises, a newspaper reported.

Dijsselbloem, the head of the euro zone's finance ministers and like Knot a Dutchman, said on Monday the rescue program agreed for Cyprus - the first to impose a levy on bank deposits - would serve as a model for future crises.

Those comments - which Dijsselbloem later rowed back on -prompted a market selloff and led two other ECB policymakers, including executive board member Benoit Coeure, to say on Tuesday that Cyprus was a unique case.

But Knot, who sits on the bank's main decision-making body, said: "There is little wrong with Dijsselbloem's remarks.

"The content of his remarks comes down to an approach which has been on the table for a longer time in Europe. This approach will be part of the European liquidation policy."

Knot's comments, reported by Dutch daily Het Financieele Dagblad, were accurate, a spokesman for the central banker said.

They threaten to further muddy the waters over an issue that continues to divide monetary policymakers and senior politicians in the currency bloc - who should foot the bill for cleaning up the region's underperforming banks.

In a speech on Thursday night in Amsterdam, Knot said euro zone banks needed to clean up their balance sheets by winding down loss-making operations.

"Firstly, there has to be transparency about losses in the banking sector. Secondly, banks have to wind down their loss-making operations," Knot said.

Under the Cyprus bailout, bank depositors whose accounts hold more than 100,000 euros face heavy losses.

(Reporting by Ivana Sekularac and Gilbert Kreijger; Editing by John Stonestreet)

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