The worst may still be ahead for British banks, and they should not resist bolstering their defenses against the kind of "end of the world" risks that could yet occur, Bank of England deputy governor Paul Tucker said on Wednesdsay.
"We are in very difficult circumstances at the moment in the sense that huge risks are behind us. There is still a tangible probability, not a high probability, that the worst may still be ahead," Tucker told the British Bankers' Association's annual conference.
Tucker is the leading contender to succeed Mervyn King as governor of the Bank of England, and warned that even new Basel rules designed after the financial crisis were not enough to ensure banks had adequate defenses.
"Basel I, II, III, IV, and V are not calibrated for the kind of end of the world risks that lie within the realms of the possible at the moment," he said.
He continued: "If we get a tidal wave, we may all be grateful that there are a few billion more in capital here and there in the banking industry, keeping banks in the private sector rather than the dead hand of state ownership."
The central bank's Financial Policy Committee, on which Tucker serves, has repeatedly urged British banks to raise their capital levels, sparking complaints from the industry that Britain is adding too many burdens on top of international standards.
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