ECB's Nowotny: euro rescue fund could get banking licence

(VIENNA) - There are arguments in favour of giving Europe's permanent bailout rescue fund a banking licence in order to boost its firepower, European Central Bank governing council member Ewald Nowotny was quoted as saying Wednesday.

"I think there are pro arguments for this," Nowotny, who is also head of the Austrian central bank, said in an interview with Bloomberg.

"There are also other arguments but I would see this as an ongoing discussion," he said, adding that he was "not aware of specific discussions within the ECB at this point."

The European Stability Mechanism (ESM), will only be operational in September and there are concerns that its 500-billion-euro ($605-billion) resources are too weak if larger eurozone countries like Spain or Italy need bailouts.

Arming the ESM, which replaces the European Financial Stability Facility (EFSF), with a banking licence would enable it to borrow additional funds from the ECB, thereby increasing its resources.

The Austrian central bank confirmed Nowotny's comments.