Protections put in place to deal with the failure of a major bank are “not there yet”, a deputy governor at the Bank of England has said.
Jon Cunliffe said the powers and institutions are in place to cope with a collapsing bank but the resources are not.
Britain will not become part of an EU banking union aimed at making bailouts a thing of the past, he also told peers.
Mr Cunliffe, who is responsible for financial stability at the central bank, told the EU Financial Affairs Sub-Committee: “In terms of sufficiency to deal with the failure of a major cross-border bank – I’m talking about the European Union as a whole and the UK – we are well advanced generally down that agenda but we are not there yet, because although we now have the powers and the institutions to do that building up of the loss absorbency, the loss absorbing resources that you could use in a resolution, that’s going to happen over the next four years.”
The eurozone is moving towards a system of common rules to prevent a banking crisis.
Asked if the UK would become part of a banking union, Sir Jon replied: “No. It’s a political decision and it could be taken.
“I do not think a banking union is necessary to operate the single market in financial services, and so I can’t see why, when we retain responsibility for our currency, for our central bank, lender of last resort, why it would be necessary, or in terms of accountability, desirable, to make that step.”
Mr Cunliffe said the single currency nations must integrate more closely but insisted the problems that would create for the UK and other countries outside the eurozone are “not immovable”.