The governor of the Bank of England, Mervyn King, has warned that the US sub-prime mortgages crisis poses more risks for the UK's financial system.
He also revealed that it was Chancellor Alistair Darling who decided not to support a Northern Rock takeover bid.Mr King told the BBC he had advised the chancellor that governments should not provide financial help to one company so that it could take over another. Lloyds TSB had asked for a £30bn Bank of England loan to finance the deal.
Speaking to BBC Radio's File on 4, Mr King said the bank had wanted a two-year loan at competitive rates."I said to the chancellor: 'This is not something which a central bank can do.' "'They don't normally finance takeovers by one company for another, let alone to the tune of £30bn, which is rather a large amount of money'."
When the Lloyds TSB bid collapsed in September, Northern Rock had to go to the Bank of England and ask for emergency funding. Northern Rock's need for emergency cash sparked the first run on a UK bank for almost 150 years.
Speaking to BBC Radio's File on 4, Mr King said the bank had wanted a two-year loan at competitive rates."I said to the chancellor: 'This is not something which a central bank can do.' "'They don't normally finance takeovers by one company for another, let alone to the tune of £30bn, which is rather a large amount of money'."
When the Lloyds TSB bid collapsed in September, Northern Rock had to go to the Bank of England and ask for emergency funding. Northern Rock's need for emergency cash sparked the first run on a UK bank for almost 150 years.
Crisis not over
Mr King said it was likely to be several months before banks returned to normal after the crisis, because it would take that long for banks to disclose all the losses from financial instruments linked to US sub-prime mortgages. "I think most people expect that we have several more months to get through before the banks have revealed all the losses that have occurred, and have taken measures to finance their obligations that result from that, but we're going in the right direction," he said.
"There is always, in a period like this, the possibility that a shock from outside the UK, one from the world economy, might create further fragilities, but to some extent there are always risks, there are always fragilities.
Mr King said it was likely to be several months before banks returned to normal after the crisis, because it would take that long for banks to disclose all the losses from financial instruments linked to US sub-prime mortgages. "I think most people expect that we have several more months to get through before the banks have revealed all the losses that have occurred, and have taken measures to finance their obligations that result from that, but we're going in the right direction," he said.
"There is always, in a period like this, the possibility that a shock from outside the UK, one from the world economy, might create further fragilities, but to some extent there are always risks, there are always fragilities.
No comments:
Post a Comment