FRANKFURT, March 24 (Reuters) - An eventual increase in interest rates will bring both benefits and risks for banks, a senior European Central Bank supervisor said on Friday, as markets increasingly price in a phasing out of the ECB's easy-money policy.
"The prospect of a normalisation of the interest rate cycle will bring benefits but also some risks, depending on the timing and speed as well as the banks’ preparedness," Ignazio Angeloni, a senior official in the ECB's supervisory arm, said in Milan.
"Retail banks may look forward to higher revenues from traditional intermediation, but ... higher funding costs might accrue before banks are able to benefit on the asset side."
He also defended the ECB from accusations in Italy that is not being even-handed by focussing more on unpaid loans, a key problem for the country, than on hard-to-value derivatives held by investment banks such as Germany's Deutsche Bank. (Reporting By Francesco Canepa, editing by Larry King)