BoE: Limit bonuses to boost bank capital
Wednesday 25 January 2012 - by Karina Whalley
Speaking in Brighton on Tuesday, the governor of the UK's central bank Mervyn King said that the BoE stands ready to provide liquidity to healthy banks against good collateral should market conditions deteriorate.
The governor says that the world economy is moving to a new equilibrium while over-leveraged balance sheets will need to be corrected.
But the governor praised UK banks for having made "substantial progress" in rebuilding both their capital and liquidity since the 2008 financial crisis. He also said the BoE's framework for lending to healthy banks in stressful periods has been "completely overhauled" since the beginning of the crisis.
In December, the UK central bank introduced a new auction of central bank money against wider collateral called the Extended Collateral Term Repo Facility.
The BoE also coordinated an expanded network of swap arrangements among the world's major central banks.
"Starting from a position of excessively leveraged balance sheets, the path of recovery is likely to be arduous, long and uneven," King said.
"The position of the world economy, especially in the euro area, is serious. But there is no reason to despair. All crises come to an end."
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