The European Central Bank (ECB) has suggested the low interest rate environment embedded within Europe and plaguing pension scheme funding has not been caused by its monetary policy.

The Frankfurt-based bank’s vice president, Vítor Constâncio, said the criticisms laid at the feet at the bank over the financial stability risks its policy were unfair.

Speaking at an economic congress at the University of Mannheim in Germany, Constâncio said that while stability risks from the search for yield were real, they needed to be addressed by macro-prudential policies from regulations, not the central bank.

He said those criticising the bank for causing the low-interest rate were incorrect, and that the opposite was true.

The ECB lowered its marginal lending facility interest rate in four stages, reducing it from 2% in November 2009 to 0.3% in September last year.

It has also embarked on policies aimed at adding liquidity into the euro-area including a €1.1trn quantiative easing programme of euro-zone sovereign bond purchase in order to stave off deflation.

Constâncio said the ECB and partner central banks operating similar low-rate policies were attempting to fix problems they did not create.

Low interest rate policies in the euro-zone, UK and US have hampered pension scheme funding by driving down discount rates for liabilities, with quantitative easing leading to lower yields on assets due to crowding.

Constâncio said: “Medium and long-term market interest rates are mostly influenced by investors and market players.

“For a few decades we have been witnessing a sort of secular trend towards lower real interest rates.

“This trend is related to secular stagnation in advanced economies, resulting from a continuous deceleration of total productivity growth and an increase in planned savings accompanied by less buoyant investment prospects.

“Monetary policy short-term rates are low because of those developments, not the other way around.”

He said the ECB’s monetary policy had been implemented to bring inflation closer towards its 2% target and normalise growth rates – which would allow higher interest rates.

Constâncio also said he did not think quantitative easing, and increasing pressure on investors’ search for yield was leading to asset bubbles.

In May, ECB president Mario Draghi denied the quantitative easing programme would damage pensions in the long run.

At the time of the announcement, fears around the industry began over the asset purchase programme increasing liabilities via lower yields, while making returning assets more expensive and difficult to find.

But Draghi said quantitative easing would lead to higher contribution and saving rates, thus not damaging pensions.

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