Andrew Bailey, who is due to become Bank of England governor this month with Britain facing an economic hit from coronavirus, said financial support would probably have to be provided for companies struggling with the disruption caused by the outbreak.
Investors expect the BoE will cut interest rates, possibly before the first scheduled policy announcement under Bailey on March 26, as the spread of the virus increasingly takes its toll on the global economy and supply chains.
Bailey, who is currently head of the Financial Conduct Authority (FCA) regulator, said the impact of coronavirus would be his top priority when he replaces Mark Carney as BoE governor on March 16.
“I am not in any sense reducing the importance of monetary policy, (but) all the focus is on monetary policy,” Bailey told parliament’s Treasury Committee on Wednesday.
“I think it is quite reasonable to expect we are going to have to provide … some form of supply chain finance in the not very distant future now to ensure that the effects of this shock from the virus are not damaging to many forms of activity.”
British finance minister Rishi Sunak is due to announce a budget statement on March 11.
On Tuesday, the U.S. Federal Reserve announced a surprise interest rate cut, raising speculation that the BoE and other central banks would follow suit.
The number of confirmed coronavirus cases in Britain rose to 85 on Wednesday in the biggest daily jump since it was first detected in the country.
Bailey said smaller companies, in particular, would need support, and quickly.
As head of the FCA, Bailey has been criticised for being too lenient on financial firms that engaged in misconduct as well as the handling of the suspension of the Woodford equity fund which was popular with retail clients who now face large losses.
He faced persistent questions on these subjects from Treasury Committee lawmakers on Wednesday.
Committee chair Mel Stride asked Bailey if he was “nimble” and “dexterous” enough to head a major central bank.
Bailey replied by recalling his role in shoring up Britain’s banking system during its near-collapse over a decade ago when he was a senior BoE official.
“When I look back at the financial crisis, and you use words like ‘nimble’ and ‘dexterous’, we had to do things in short order during that period which were pretty unprecedented, absolutely unprecedented in the history of certainly the bank and we had to do them at short notice,” Bailey said.
(Reuters)
Comments are closed.