15 Jan 2014
BoE's Carney: Breaking up banks doesn't necessarily mean creating more competition
FXstreet.com (Łódź) - Bank of England governor Mark Carney testified at the British parliament on Wednesday before the Treasury Select Committee. He and other Financial Policy Committee members answered questions concerning the latest Financial Stability Report findings.
When asked about the issue of bank restructuring Carney stressed it was important to look at the general business model of the financial institutions."Just breaking up an institution doesn't necessarily create a viable or more intensive competitive structure," he suggested.
Furthermore, the BoE governor assured that the expiry of the Funding for Lending Scheme, designed to encourage banks to lend more to households, would not be a problem as according to research “funding conditions for commercial lenders are very strong.”
“And secondly, what the FLS was becoming relative to its original spirit - to get funding costs down from extreme levels and support the funding market - to be consistent with that spirit, it would become a backstop-type facility, something that banks would withdraw in the event of disruptions to funding markets," Carney said.
There were also questions about the causes of the rise in house prices in the UK and its implications for the economy. Carney and other FPC members pointed to a bounce-back effect following the previous price drop and assured that the lending situation would be closely observed and actions taken in case it deteriorates, posing a threat to financial stability.
Moreover, Carney commented on the recent introduction of a cap on bonuses for bankers in the EU, saying that this was not the best manner of controlling pay. When asked about the possibility of an interest rate hike he suggested that no dramatic increases were expected.
When asked about the issue of bank restructuring Carney stressed it was important to look at the general business model of the financial institutions."Just breaking up an institution doesn't necessarily create a viable or more intensive competitive structure," he suggested.
Furthermore, the BoE governor assured that the expiry of the Funding for Lending Scheme, designed to encourage banks to lend more to households, would not be a problem as according to research “funding conditions for commercial lenders are very strong.”
“And secondly, what the FLS was becoming relative to its original spirit - to get funding costs down from extreme levels and support the funding market - to be consistent with that spirit, it would become a backstop-type facility, something that banks would withdraw in the event of disruptions to funding markets," Carney said.
There were also questions about the causes of the rise in house prices in the UK and its implications for the economy. Carney and other FPC members pointed to a bounce-back effect following the previous price drop and assured that the lending situation would be closely observed and actions taken in case it deteriorates, posing a threat to financial stability.
Moreover, Carney commented on the recent introduction of a cap on bonuses for bankers in the EU, saying that this was not the best manner of controlling pay. When asked about the possibility of an interest rate hike he suggested that no dramatic increases were expected.