The “worst may still be ahead” for the banking system, the Bank of England’s deputy governor has told a gathering of leading bankers.
Paul Tucker said reserves held by banks were still not calibrated for the “end-of-the-world risks” that remained a possibility.
He added that bank bosses should be paid in debt, so they had a stake in the survival of their institutions.
Mr Tucker is a leading contender to be the Bank of England’s next governor.
Speaking at the British Bankers’ Association’s (BBA’s) annual conference in London, Mr Tucker said that the most important issue ahead was ensuring that banks could be allowed to fail in an orderly way.
This should be done without taxpayer support, he said. This would also make it easier for new, smaller entrants to the banking sector and encourage competition in a UK market dominated by a small number of institutions.
However, he also sounded a positive note for the City of London, saying that the Bank believed – if the correct structure was in place – that the financial centre would prosper in the future.
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