ECB’s Wellink Says Crisis Not Over, Sees New Problems

Feb. 1 (Bloomberg) -- The global financial crisis is not yet close to ending as U.S. house prices decline further and more areas of the economy become affected, European Central Bank Governing Council member Nout Wellink said.

“No, I don’t think so,” Wellink said when asked if the crisis is over or about to end, during an interview with Dutch state broadcaster NOS. “New problems are emerging as a result of the worsening of the economy and problems could arise in the sectors such as commercial real estate and credit cards.”

Financial institutions worldwide have written off more than $1 trillion since the credit crisis began in 2007. Wellink, who also heads the Dutch central bank, warned that global economic development may slow as banks withdraw from emerging markets and focus on their domestic customers.

“That is a form of modern protectionism and the ultimate consequence is that the economic development in the world will become less favorable,” Wellink said.

Dutch financial institutions including ING Groep NV have been thrown lifelines by the Dutch government. ING said on Jan. 26 it will transfer the risk on 80 percent of its 27.7 billion euros ($35.5 billion) of Alt-A mortgage securities to the government, limiting further writedowns. The bank, which traces its roots to 1743, was the first to draw on a 20-billion-euro fund set aside to prop up financial firms.

‘Had About Everything’

“In terms of steps that have been taken, we’ve had about everything I think,” Wellink said, adding that the central bank is studying a possible extension for pension funds to recover their coverage ratio. The central bank will come with an opinion before the first of March and will be “pragmatic.”

Pension funds have suffered from the decline in equities and other assets amidst turmoil in the financial markets and falling interest rates. Europe’s Dow Jones Stoxx 600 Index sank 46 percent last year.

The Dutch central bank requires pension funds whose coverage ratio drops below 105 percent to file a recovery plan by April. The number of Dutch pension funds that fail to meet the requirement surged more than fivefold in the third quarter as stock markets fell, according to the central bank.