Banks could be allowed to fail, BoE chief warns

2 March 2011

The governor of the Bank of England has warned that financial institutions could be allowed to collapse following Britain's impending regulatory overhaul in order to avoid future taxpayer bailouts.

Speaking before the House of Commons Treasury Select Committee, Mervyn King insisted that the central bank - which will assume some oversight duties from the outgoing Financial Services Authority (FSA) - would ensure bank failures did not "cause havoc".

"The objective of supervision is to recognise that banks will fail," he told the panel. "Our role is not to stop them failing, it is to make sure that if they fail, they do not contaminate the rest of the economic and financial sector."

Mr King added that public perceptions of the banking industry remained a major political issue and said he was "surprised" that there had not been greater anger among voters at the repercussions of the 2008 crisis.

Under plans unveiled by the UK's coalition government last June, the FSA is expected to be scrapped and replaced by the new Financial Conduct Authority and Prudential Regulatory Authority by 2012.

By Tony Aynsley

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development