28 October 2008

UK Financial Stability Review

The Report analyses the turmoil and the actions taken by the UK authorities and other countries. “We need a fundamental re-think of how to manage systemic risk internationally", Deputy Governor Sir John Gieve said.

The Report analyses the turmoil and the actions taken by the UK authorities and other countries. It sets out the Bank's views on the near-term prospects for the financial system and the reforms necessary to address systemic risks.

 

The Report notes that the undertaken measures helped to underpin confidence in the banking system, although risks remain in the financial system. The Report also highlights that, over the medium-term, banks will need to adjust their balance sheets and funding models, weaning themselves off current high levels of official sector support. Capital injections and debt guarantees will help this adjustment.

 

The Report also explores the need for a fundamental rethink of how to safeguard against systemic risk, for example through the development of new counter-cyclical tools to dampen the financial cycle and though stronger capital and liquidity requirements.

 

“We need a fundamental re-think of how to manage systemic risk internationally,” Deputy Governor Sir John Gieve said. “That means not just increasing capital and liquidity requirements for individual institutions but relating them to the cyclical growth of risk in the system more broadly. Counter cyclical policy of that sort should complement regulation of companies and broader macro-economic policy.”

 

Summary

Financial Stability Report

Speech Sir John Gieve

 

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