FRANKFURT - The European Central Bank's balance sheet is bigger than needed, ECB board member Isabel Schnabel said on Thursday as the central bank began shedding some of the bonds it bought over years of aggressive money printing.

"Our current estimates suggest that the amount of central bank reserves currently held by the banking sector exceeds, by a significant margin, the level necessary to steer short-term market rates close to our key policy rate even under a floor system," Schnabel said.

"This implies that the current size of our balance sheet is larger than necessary to effectively implement our monetary policy stance."

(Reporting by Francesco Canepa; editing by Jason Neely)