Senior Bank official speaks at Qatar Centre for Global Banking and Finance conference
Speaking at the second annual Bank of England Watchers Conference held by the School's Qatar Centre for Global Banking of Finance, Andrew Hauser, Executive Director for Markets at the Bank of England warned of the risk of larger and faster deposit runs as a result of technological change.
He said that addressing this possibility was one of the bigger challenges facing central banks today. Referencing the impact of the collapse of Silicon Valley Bank earlier this year, he highlighted the challenge of 'ensuring that banks' liquidity insurance remains appropriate as technological change increases the risk of larger and faster deposit runs.'
He also discussed another primary concern for many central banks at the moment: determining where central bank balance sheets should settle in the medium term as they try to bring inflation back to target while unwinding Quantitative Easing.
Addressing speculation on the Bank's reserves remuneration policy
During the discussion following his speech Mr Hauser re-iterated the Bank of England's commitment to its current policy of paying banks interest on the reserves they deposit with it. There has been persistent speculation on this issue because of the potential savings it could present. In recent weeks the Swiss National Bank has announced cuts to the rate it will pay on bank deposits and there has been discussion about whether the European Central Bank intends to follow suit.
The basis of our regime is reserves remuneration. If we didn't remunerate reserves, rates would fall below the Bank Rate. And at a time when we're trying to bring inflation down, that would be uncomfortable.
Andrew Hauser, Executive Director for Markets, Bank of England
Mr Hauser spoke at the second annual Bank of England Watchers' Conference organised by King's Business School's Qatar Centre for Global Banking and Finance and the Money Macro Finance Society. The purpose of the conference, which was inspired by the well-known European Central Bank Watchers' Conference and the US Monetary Policy Forum, is to bring together leading academics, policymakers, and financial market practitioners to discuss and debate salient policy issues, with a deliberate emphasis on the Bank of England.
