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Bank of England's deputy head calls for new tools
(Agencies)
Updated: 2008-12-22 18:45 LONDON -- The Bank of England needs a new way of keeping financial crises from getting out of hand, its deputy head said in an interview aired Monday.
"We need to develop some new instruments, which sit somewhere between interest rates, which affect the whole economy ... and individual supervision and regulation of individual banks," John Gieve told the BBC's Panorama television show. "We need to develop something which bridges that gap and directly addresses the financial cycle and prevents the financial cycle and the credit cycle getting out of hand," he added. He said that if the bank had tried to use interest rates to keep the price of assets, like houses, from spiraling upward over the past years, it would have held down the level of activity in other parts of the economy, like manufacturing, that needed to be allowed to enjoy prosperity. Gieve also acknowledged that the government could end up losing money from its nationalization of several of the country's banks. "There are some books -- Northern Rock, Bradford & Bingley -- which clearly have a level of defaults in them," he said, adding that he was not sure how the defaults would impact the total capital holdings of the banks. Gieve was appointed deputy governor of the bank in January 2006 and is also a member of the bank's interest rate setting committee. |
