THE new Governor of the Bank of England said Yorkshire is one of the potential growth areas as the financial services industry restructures itself following the banking crisis.
Speaking to the Yorkshire Post during a visit to Leeds, Mark Carney highlighted the virtues commonly associated with smaller lenders.
He said: “If you look at what is valued again in financial services, it is a focus on financial institutions that can make their own credit decisions, that aren’t run by algorithms or computers, that know their customers, that have areas of focus and speciality, that have boards that are actively involved and aware of concentration risk.”
Mr Carney revealed that the Prudential Regulatory Authority, which supervises banks and building societies, has 20 applications for banking licenses, up from three a year ago, after the Bank eased the barriers to entry.
He said: “The point being that new institutions that have a regional focus, that know their customers and have that attitude are going to develop and we see some examples here.”
In a wide-ranging interview, the Canadian banker spoke about economic recovery, the state of the housing market and the strength of the British banking system.
He also defended his controversial new policy of forward guidance, which was designed to give households and businesses advance notice of interest rate rises.
Mr Carney met with regional business leaders at the office of law firm DLA Piper yesterday morning.
He said: “My impressions are that the recovery has begun in Yorkshire. It’s gathering some pace, but it’s still early days.”
He added: “Across the UK, the recovery is broadening so it’s more than just recovery in a particular sector of the economy and we are seeing an associated pick-up of growth in Europe and the United States is continuing to perform well.
“The advanced economies as a whole are doing a bit better. That’s going to help the UK as a whole. These are more traditional export markets so that matters. Within the UK, we are probably leading the pack of the major advanced economies as we speak right now.
“But of course we had the deepest recession so we are coming back from that.
“The sustainability of it will turn on gradually getting incomes up, more people into work, but also getting wages up over time and that’s going to come from sustained demand and a balanced recovery.”
Mr Carney said the housing market has seen a turnaround, but levels of activity are still only around two thirds compared to longer-term averages for the sector. He added: “The core of the recovery is not housing, but that said, the prospects and level of activity in housing have turned from low bases and we as the Bank of England need to be vigilant about how those dynamics move in the future.”
Critics have claimed that the Bank’s new forward guidance policy could trigger interest rate rises while parts of the country outside London and the South East are struggling to recover.
The Bank has said it will consider increasing the cost of borrowing when average unemployment falls to 7 per cent.
Mr Carney said: “[We are] well aware that the level of unemployment in the region is nearer to 9 per cent than it is to the national average of 7.7 per cent.
“But this is a policy for the UK as a whole and the point is that businesses and households understand that we are not going to look to raise interest rates until we see the economy really growing.
“Using that 7 per cent unemployment threshold is the point at which we begin to think about tightening.
“That should be consistent with growth broadening across the UK, including, very importantly, to Yorkshire.”
Mr Carney said Britain’s banks are “a lot stronger than they used to be”. He added: “We have had some difficult discussions over the summer to ensure that a couple of the major institutions had credible plans to get them to what we view as a very important threshold of capitalisation.
“Those plans are in place. They have been acted upon. So the core of the system is now at a level where their capital and liquidity is consistent with supporting the recovery and that’s incredibly important.”
He said: “We are working for the British public on this one.
“You can’t lend unless you’re adequately capitalised and that’s been proven time and time again and getting the UK banks and building societies to that capital threshold has been incredibly important and I would say the institutions in this region were at those thresholds in advance of some of the larger institutions in this country.”
‘There’s no case for more QE’
THE Bank of England would consider the case for more quantitative easing should the recovery falter, Mark Carney told the Yorkshire Post.
“But my personal view is, given the recovery has strengthened and broadened, I don’t see a case for quantitative easing and I have not supported it.”
The central bank has pumped £375bn into the economy to date.
Yesterday’s visit to Yorkshire was not the first for Mr Carney. He visited York and Harrogate as a tourist while working in Canada.