Mervyn King has said that the crisis is set to continue, and that the central bank must take steps to prevent future crunches.
The governor of the Bank of England has said that he does yet not see an end to the credit crunch.
In a speech to the British Bankers' Association, Mervyn King said that the crisis is "not yet over", despite the unprecedented £50 billion scheme the central bank launched in April to reduce the effects of the squeeze. Under the terms of the plan, some of the riskiest and hardest-to-value assets held by mortgage lenders were swapped by the Bank for safe government bonds; these bonds were then traded on the markets by the firms, upping their revenue.
The governor also offered his own thoughts on how a future credit crunch could be prevented in the speech. "During my second term as governor I would like to see us establish a framework for financial stability that is on as sound a footing as the one we have successfully established for monetary stability," he said.
Mr King, referring to the bonds-swapping scheme, said that a permanent new exchange facility should be created by the Bank in order to help out in future credit squeezes.
"Any such facility will need to meet two challenges: it will need the right pricing structure and it will need to overcome the 'stigma' problem that has affected access to all central banks during the current crisis," he added.
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