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Mark Carney, incoming Governor of the Bank of England, says “the next two years will be decisive” for the UK banking sector.
The incoming Governor of the Bank of England has argued that the issues of “shadow banking” and banks being “too big to fail” would need to be resolved in the next two years if the banking crisis of 2008 was not to be repeated.
Speaking at the World Economic Forum in Davos Mark Carney, currently Governor of the Bank of Canada, argued that the “next two years will be decisive on ending ‘too big to fail’ and addressing shadow banking and over-the-counter derivatives, that absolutely amplified the last crisis – and will do so again if we don’t complete our agenda”.
Mr Carney, who is set to replace current Bank of England Governor Sir Mervyn King in July, stated that central banks by themselves are unable to resolve the “tail risks” affected the sector and that unregulated financial activities, such as over-the-counter derivatives, cannot go unchallenged.
The incoming Governor’s comments suggest a significant change on policy towards measures that will allow for the UK to achieve “escape velocity” and argued that “there remains considerable flexibility – which includes the use of communications, which includes the use of unconventional measures”.
Commenting on the monetary policy Mr Carney stated that criticism which argues major economies, including the UK, have “maxed out” monetary policy options was invalid as part “of the point is to ensure that as the economy gains traction, stimulus will continue to be provided appropriately”.
Mr Carney’s analysis was supported by Christine Lagarde. The Managing Director of the International Monetary Fund said that the European Central Bank needs to ensure that the tools that are in the toolbox have to be operational. It doesn’t necessarily mean they have to be used… but they must be operational”.
Speaking on the same panel as Mr Carney, Ms Lagarde predicated that 2013 would not “be a walk in the park” for the Eurozone.
