King: 5 More Years Of Financial Pain Ahead
The governor of the Bank of England has warned that Britain may not be halfway through the financial crisis.
Sir Mervyn King made the remark while telling MPs he was struck by the speed at which the economic outlook was deteriorating in the eurozone.
He said he was "pessimistic and particularly concerned" as the problems in Europe continued without any decisive action.
In a gloomy Treasury Select Committee hearing, Sir Mervyn admitted nobody expected the financial crisis that began in 2007 to have lasted so long, but said: "I don't think we're halfway through it".
He added: "My estimates of how long it will take to recover is expanding all the time."
There was little sign of further help for borrowers as Sir Mervyn argued that interest rate cuts would do little to help UK recovery efforts.
He stated his belief that such a move would fail to lead to widespread cuts in borrowing costs and could instead damage small lenders.
Sir Mervyn instead looked to assure MPs that efforts being taken to pump cash into the banking system would encourage banks to lend to households and businesses.
He said the so-called funding for lending scheme would be launched in "a very few weeks" but admitted there was "not enormous" take-up last week among banksfor its first monthly auction under a separate six-month loan facility programme.
Sir Mervyn also hinted that there would be further moves to boost lending this week.
The Bank is widely expected to use its financial stability report on Friday torecommend plans to relax rules requiring banks to hold large amounts of cash as a buffer.
He signalled to MPs too that the Monetary Policy Committee (MPC) stood ready to increase its programme of quantitative easing to pump more cash into the economy.
Sir Mervyn and three other members of the MPC were narrowly outvoted on expanding QE above the current level of £325bn at this month's meeting.