Arab Today, arab today bank of england chief warns against repeat of 1930 crisis
Last Updated : GMT 15:34:19
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Bank of England chief warns against repeat of 1930 crisis

Arab Today, arab today

Arab Today, arab today Bank of England chief warns against repeat of 1930 crisis

London - KUNA

Bank of England governor Sir Mervyn King has warned that lenders would have to suffer further losses and writedowns if normal banking services are ever to return. Addressing the South Wales Chamber of Commerce, Sir Mervyn warned against repeating the mistakes of the 1930s, when for too long banks and other financial firms deluded themselves into thinking debts could be repaid. The Governor said advanced economies could find it easier to emerge from the downturn if banks and other financial firms accepted steeper losses were on the way. His comments were made as he discussed the impact of the 80 billion pouna Funding for Lending scheme, which was recently launched in a bid to unclog the flow of credit to households and businesses. While more than 20 banking groups, including the five largest lenders in the UK, have signed up and bank funding costs have fallen by around one percentage point, Sir Mervyn warned the initiative was temporary. \"I am not sure that advanced economies in general will find it easy to get out of their current predicament without creditors acknowledging further likely losses, a significant writing down of asset values and recapitalization of their financial systems,\" he said. \"Only then will it be possible to return to a more normal provision of the vital banking services so crucial to an economic recovery. \"In the 1930s, faced with problems of sovereign and other debt similar to those of today, the pretence that debts could be repaid was maintained for far too long. We must not repeat that mistake.\" Looking ahead, the Governor said that despite a probable rise in output in the third quarter, which would mark the end of the double-dip recession, the big picture shows that gross domestic product is \"barely higher than two years ago\". While total exports have risen sharply as the value of the pound fell, manufactured exports to the struggling continent are falling, he added. He added: \"The zig-zag pattern of quarterly growth rates of GDP that we have seen this year is likely to continue.\" But Sir Mervyn said there were also \"encouraging signs\" as the labour market remains resilient. Considering the health of the economy, the governor said that the Monetary Policy Committee, of which he is chairman, will \"think long and hard\" before it decides to increase its quantitative easing programme from its current level of 375 billion pound.

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