Crisis contingency urged by Bank of England
(1 December 2011 – United Kingdom) Bank of England (BoE) governor Mervyn King told a parliament committee in London that authorities must be ready to act if the euro-area crisis continues to escalate.
''What we have to do is to be ready and prepared with contingency plans and to make sure that as far as possible our banking system is as robust as possible to withstand whatever shocks that come from the euro zone,'' Sir Mervyn said.
Britain’s central bank restarted bond purchases in October for the first time in almost two years, citing risks from the crisis in the euro area, and some policymakers have said more may be needed.
As the region's leaders struggle to prevent turmoil spreading to core countries such as Germany and France, Sir Mervyn has said the bank cannot quantify the possible impact of the ''most extreme events'' in the region.
''There are many things that could happen if developments in the euro zone get worse, but I honestly don't think it makes much sense to pretend we can precisely know how this will play out,'' he said.
The Bank of England cut its 2012 growth projection to 0.9 percent from 2.2 percent this month. Sir Mervyn said the revision was largely due to the euro crisis. It expanded its bond-purchase program by £75 billion ($A117 billion) to £275 billion last month.
''I don't think it's possible to continue indefinitely, with this degree of fragility,'' Sir Mervyn said. ''One way or another, something will happen.''
He also said that while British banks were better capitalised than before the crisis, ''there is certainly no room for complacency''.
''You can see that even for banks in this country, and even US banks, the funding problems have worsened since August," he said.
Britain’s central bank restarted bond purchases in October for the first time in almost two years, citing risks from the crisis in the euro area, and some policymakers have said more may be needed.
As the region's leaders struggle to prevent turmoil spreading to core countries such as Germany and France, Sir Mervyn has said the bank cannot quantify the possible impact of the ''most extreme events'' in the region.
''There are many things that could happen if developments in the euro zone get worse, but I honestly don't think it makes much sense to pretend we can precisely know how this will play out,'' he said.
The Bank of England cut its 2012 growth projection to 0.9 percent from 2.2 percent this month. Sir Mervyn said the revision was largely due to the euro crisis. It expanded its bond-purchase program by £75 billion ($A117 billion) to £275 billion last month.
''I don't think it's possible to continue indefinitely, with this degree of fragility,'' Sir Mervyn said. ''One way or another, something will happen.''
He also said that while British banks were better capitalised than before the crisis, ''there is certainly no room for complacency''.
''You can see that even for banks in this country, and even US banks, the funding problems have worsened since August," he said.
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