Banking Crisis - Treasury Contents

Examination of Witnesses (Questions 2420-2422)


26 FEBRUARY 2009

  Q2420  Chairman: Can we await that shortly then?

  Mr King: Yes, I think you can expect that there will be an exchange of letters and that we will be able to explain that to you in more detail when we come back again in March.

  Q2421 Chairman: Good. Lastly, Governor, the genesis of the present crisis: how much do you put that down to the major imbalances within the global economy, how much are they receding and what prospect is there for re-balancing?

  Mr King: I think that was a major factor in making this possible and I think it is very important that we are not just diverted into fields of regulation and the behaviour of banks and incentives. They are undoubtedly important but it is not the sole thing. The financial imbalances I believe generated capital flows which were the underlying cause of all these problems, and what we are going through now in the world downturn is leading to changes in those imbalances, undoubtedly. What we do not have is an international monetary system that will prevent those imbalances from being created again, and that is what is so important now.

  Q2422  Chairman: In terms of our inquiry, Governor, we hope to come out with a report within a month or so but we are following that up with the international dimension, which is very important, and if we can receive any evidence from you on that, but also on the issue of public confidence, because we were in Japan in October and the message there was that you have got to take the public and the consumer with you. I think there is a lot yet to do in that area.

  Mr King: We are very conscious of that. If there was an area where we would really have to improve and work harder, it is undoubtedly in the area of communications. That is easier said than done. I do not think we shall be popping up all the time on the regular programmes but we need to be able to explain clearly and simply what we think the problems are and what we are doing to put them right. If I could take the opportunity now: we will come through this. There have been downturns and financial crises in the past. Undoubtedly we will come through this. It will not go on for ever. It will be painful but we will come through it and I think we will have learned some painful lessons but lessons that will enable us to improve the system.

  Chairman: Governor, we have given you notice of that. Maybe you could do some fresh thinking for us. We have found your evidence and that of your colleagues at the beginning of this inquiry very helpful in helping to formulate our policy. That just leaves me to wish Mr Paul Tucker every success in your new job. Thank you very much.

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