Deputy governor puts case for smaller banks

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THE financial system might be safer if we had a larger number of smaller banks, according to a senior figure at the Bank of England.

Charlie Bean, the Bank’s deputy governor of monetary policy, made the comments during a question and answer session after speaking at the University of Hull Business School on Wednesday night.

Responding to a question from the audience about the future of the banking sector, Mr Bean said: “If banks were smaller, it’s actually easier to handle them if they get into difficulty. We do have a financial system with a relatively small number of very large banks who do take a very large share of the banking market and, arguably, the system would be safer if we had a larger number of smaller banks.

“That may well develop over time...Certainly, more competition would be helpful.”

Mr Bean was the guest speaker at the JSG Wilson Lecture in Economics, which attracted an audience of around 120 academics and business leaders.

According to figures issued last week, the UK economy grew one per cent in the third quarter.

In his speech, Mr Bean said the economy had been boosted by one-off factors relating to the Diamond Jubilee and the Olympics.

He added: “But even after taking those into account, the figure was stronger than expected.”

Responding to a question from the Yorkshire Post about whether the case for further quantitative easing had been increased or diminished by the latest growth figures, he said: “The thing I would stress as a policy maker, is you really do learn not to put too much weight on any one number...you’re always trying to tease out a picture of what’s going on from a wide range of different sources of information, from data which gets revised, not just for quarters but for years afterwards.

“I think people can sometimes place too much weight on single indicators.”

The Bank will decide next week whether to extend the purchases of Government bonds beyond the current £375bn.

Many economists expect policymakers to hold back after the economic rebound in the third quarter.

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