Carney Says Bank of England Is Already Fighting the Next Crisis

(Bloomberg) -- Bank of England Governor Mark Carney is already bracing for the U.K.’s next financial crisis.

While no central bank can eliminate the risk of future crises, he said the BOE is creating a more secure environment by planning for bank failures, providing liquidity and ensuring higher levels of capital.

“Something will go wrong again even if we do not know exactly what or precisely when,” Carney said in a speech Monday. “Accepting this means our best strategy is to create an anti-fragile system that can withstand potential shocks when they happen.”

By way of example, Carney cited the success of the BOE’s response to Britain’s vote to leave the European Union in 2016. That included encouraging banks to pre-position enough collateral with the central bank to enable them to draw up to 250 billion pounds ($350 billion) in liquidity on demand:

“The combination of this war chest and coordinated G-7 central bank action helped ensure markets functioned normally as the financial system absorbed a result that had been assigned a 10 percent probability hours before. And it meant we could credibly and immediately demonstrate to the public that we were well prepared.”

The comments were part of a seminar on leadership and values to students at Regents University in London, which saw Carney draw inspirations from Groucho Marx to Henry Ford. 

On the topic of humility, he noted he was in “dangerous territory, and certainly one that creates a target-rich environment for critics who can spot gaps between preaching and practicing.” He nevertheless urged the audience to be “humble about success and honest about failure.”

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Brian Swint, Fergal O'Brien

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