Cantillon: All change at ECB except rates

Manufacturing activity in the euro zone rose again last month, easing pressure on the European Central Bank to tamper with the main deposit interest rate when its governing council meets today in Frankfurt.

But with inflation slipping further, to 0.7 per cent in January, the pressure will remain in place for the bank to act.

The mixed data encapsulates the problem facing the ECB as it deals with a euro zone economy that is very gradually moving out of recession.

Analysts are divided about whether a cut of either its main refinancing or deposit rate is on the cards, although a cut is still seen as unlikely today. In any event, there will be plenty to keep analysts busy.

This week there was a number of announcements from the usually publicity-shy central bank.

Firstly, the ECB announced further details in relation to its forthcoming asset quality review of banks, confirming that the capital thresholds for banks will not be permitted to fall below 5.5 per cent common tier 1 capital in line with the parameters set out by the European Banking Authority last Friday. Disclosure of further details must wait until March, to the frustration of many banks and analysts.

Secondly, the ECB announced a reconfiguration of senior roles and portfolios within its executive board following the resignation of Jorg Asmussen in December. It included the appointment of French man Benoit Coeure, the former second in command at the French treasury, to head up international and European relations.

Separately, the bank is preparing to appoint executives to run its new supervisory wing, which is being established as the Frankfurt-based bank prepares to take over the direct supervision of banks for the first time, as part of the first stage of banking union.

Daniele Nouy is to take over as chair of the supervisory board, while Mr Asmussen’s replacement Sabine Lautenschläger is expected to become vice-chair.

How this new supervisory body intends to go about its business will be the key focus of most people’s attention over the next few months, as the ECB prepares for the biggest expansion of its responsibilities since its foundation.