A timely exit from the European Central Bank's emergency measures is essential to avoid speculative asset bubbles and to keep banks and governments from becoming too dependent on the ECB's cheap money, Executive Board member Benoit Coeure said.

Coeure said the ECB had the tools at hand to withdraw the excess liquidity it had pumped into the euro zone's banking system to avert a credit crunch and was ready to act should risks to price stability emerge.

We can withdraw the ample liquidity created as a side effect of the long-term operation whenever the Governing Council deems liquidity conditions are excessive in view of the outlook for price stability, Coeure said in a speech prepared for Barclays' European Conference to be held in Tokyo on Monday.

All the tools necessary for large-scale liquidity withdrawal are already in place or will be readily available when needed, he added.

Since the financial crisis, there has been much debate about whether central banks should have pre-emptively tightened monetary policy beforehand to slow asset price growth.

Coeure said the ECB's monetary policy strategy ensures a more symmetric policy with respect to financial misalignments and some 'leaning against the wind' if monetary trends signal inflationary pressures over and beyond what standard conjectural analysis and macroeconomic projects imply.

Speaking in more general terms about the ECB's monetary policy transmission, he said: If the volume of money and credit that is created by financial intermediaries exceeds a trend that is consistent with price stability in the long run, the central bank is also expected to increase its policy rate, because excess money and credit creation can herald risks to price stability.

The ECB has been praised by politicians and economists for taking the heat out of the euro zone's debt crisis - at least for now - after injecting over one trillion euros in ultra-cheap 3-year loans into the financial system.

At present, we are seeing some encouraging, albeit early, signs of normalization across financial market segments, Coeure said, but added that a timely exit from non-standard measures a and return to a less accommodative policy stance - once the economic conditions are ripe - are essential.

First, because monetary policy accommodation for prolonged periods of time might fuel excessive risk-taking, leverage and asset price bubbles, Coeure said. Second, it might discourage banks, companies and governments from strengthening their balance sheets and therefore create a dependence on low rates.

The ECB's loose monetary policy has raised concern about the impact on inflation - particularly in Germany - where policymakers are leading the push to prepare an exit less than a month after the ECB completed its second of two funding operations - or LTROs.

Earlier this month, Coeure had said it was still too early to decide on an exit strategy.

In his speech in Tokyo, he mapped out what an exit could look like and referred to the fact that the interest rate for the ECB's three-year loans will be set depending on the average policy rate in place for the time of the operation.

(Reporting by Eva Kuehnen, Editing by Gary Crosse)