The governor of the Bank of England has denied that there is a systemic banking crisis despite high-profile casualties in the sector.
Andrew Bailey, speaking at the IMF’s Spring meetings, said regulation introduced in the aftermath of the 2008 global financial crisis had proved effective.
“Today I do not believe we face a systemic banking crisis,” Bailey said. “When I look at the UK banks, they are well capitalised, liquid and able to serve their customers and support the economy.”
Bailey added: “In recent weeks, we have seen the crystallisation of problems in a few parts of the banking sector. This is against a background of a necessary sharp tightening in monetary policy to bring down inflation from levels that are much too high. All of this has to be set against the most serious global pandemic for at least a century and the most serious war in Europe since 1945.”
Bailey acknowledged new problems, however, that had become apparent through recent individual failures.
“We can’t assume that, going forwards, the current answer on the total size of liquidity protection [for depositors and banks] is the correct one,” he said. “We saw with Silicon Valley Bank that with the technology we have today – both in terms of communication and speed of access to bank account – runs can go further much more quickly. This must beg the question of what are appropriate and desired liquidity buffers that create the time needed to take action to solve the problem.”
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