Page last updated at 12:52 GMT, Tuesday, 10 June 2008 13:52 UK

King warns crisis 'not yet over'

Mervyn King
Mr King said financial stability is the priority for his second term in office

The governor of the Bank of England, Mervyn King, has warned that the financial crisis "is not yet over".

He also acknowledged that since the crisis broke last August, the Bank has had disagreements with commercial lenders about how to respond.

He made the comments in a speech to the British Bankers Association.

Mr King also told the bankers his thinking on how to prevent a repeat of the global credit squeeze still afflicting markets.

"During my second term as governor I would like to see us establish a framework for financial stability that is on as sound a footing as the one we have successfully established for monetary stability," he said.

'Stigma'

Mr King said the central bank would learn from the experience of a temporary scheme launched in April - where banks can exchange hard-to-trade assets for more liquid ones - to create a new facility.

"Any such facility will need to meet two challenges: it will need the right pricing structure and it will need to overcome the "stigma" problem that has affected access to all central banks during the current crisis."

Many financial institutions have been wary of seeking help from the Bank after the run on Northern Rock.

Depositors queued up to withdraw their money after it became apparent that the Newcastle-based lender had sought emergency funding from the Bank of England.



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