Bank of England chief: Financial crisis not over yet

Bank of England governor Mervyn King has warned that the financial market crisis is far from over.

In a speech to the British Bankers Association in London today, King said that the bank needed to develop a strong framework for financial stability which will be more complex than for monetary policy.

Elements of the framework, said King, were a special resolution regime for failing banks, changes to deposit insurance to reduce the incentives for bank runs, and a proper regime for the regulation of bank liquidity.

However King warned that after a decade or more of economic stability, “we are now facing a period of rising inflation and falling economic growth”.

He added that it was too early to judge whether this was the worst period of financial stress since the 1930s but added that the “crisis is not over yet”.