In a Treasury Select Committee meeting this morning, King warned MPs that the BofE is currently under-equipped to deal with the task of ensuring future financial stability in the UK banking sector.
King told the Committee the new powers given to the Bank of England in the new Banking Bill only refer to failed banks: “For growing and living banks we don’t have a single power now we didn’t have before. We only have the power of our speeches, our reports and the words we use in the tripartite process.
“The trouble is what you have given us is a statutory objective for financial stability without the right instruments to use.”
King urged MPs not to blame the Bank for any future failings if it is not ready to increase its powers: “We are still limited to merely writing reports – there is no good coming back to us in a few years time and saying why didn’t you do this, that and the other when you decided, you voted for an act that decided our power.”
He said one tool would be for the bank to be able to demand information from the UK banks whenever it wished.
King said: “The bank does not have the right to request information from banks; I regret that, I find it very hard to see why if people think the Bank should play a major role in financial stability why we shouldn’t have the right to request information from banks, we don’t have that. We have to persuade the FSA and they have to make their own mind up.”