Credit woes not over yet: bank chief
The Governor of the Bank of England has told an Ulster audience that credit will not be so readily or cheaply available to businesses and households in the wake of the current financial crisis.
Addressing the Northern Ireland Chamber of Commerce and Industry last night, Mervyn King also said the current turmoil in financial markets is not over.
He said that, although conditions have eased a little with share prices recovering and interbank interest rates falling back, some markets remain virtually closed.
And even as they re-open, he predicted, there will not be a return to the excessive risk- taking and associated rapid expansion of credit of the past few years.
"With investors more wary of risks, banks will find it harder to raise funds. So credit will not be so readily or cheaply available to businesses and households," he insisted.
Mr King said keeping inflation close to the 2% target is the biggest contribution the Bank of England can make to economic stability generally.
The bank governor told the Ulster audience that the financial crisis was caused by higher levels of savings around the globe that led to a demand for riskier financial instruments in the pursuit of higher yields.
He said liquidity should be central to the regulation of banks. " Regulation worldwide has paid insufficient attention to liquidity, focusing instead on capital."