LONDON (MNI) – UK Chancellor of the Exchequer George Osborne said
today the fall in Gilt yields since the announcement of government
austerity measures had provided significant monetary stimulus to the
British economy.
Osborne told the Treasury Select Committee that the UK’s credit
standing in the financial markets looked ‘favorable’ post-budget and
also noted the positive reaction to the June 22 emergency budget from
the ratings agencies.
“I think it is worth drawing the committee’s attention to what has
happened to market interest rates for the United Kingdom in the last six
to nine weeks. Ours have decreased by half a percent, Spain’s have
increased by half a percent, which provides significant monetary
stimulus to the economy which has helped deal with the tail risk”.
Since the June 22 budget the yields on 10-year Gilts have fallen
15bp to 3.43%. Gilts have also outperformed bunds with the spread
dropping to 74bps from 92bps.
Turning to the banking sector, Osborne said he wanted to encourage
more competition in the UK banking sector and that he hoped to see new
entrants into the industry.
“The banking sector was consolidated and has become a hell of a lot
more consolidated in the last two years, we need new entrants. We should
be encouraging new entrants.”
The chancellor also said he wanted to limit UK banks to pay for the
implied insurance they now receive from tax-payers.
“We need a tax on wholesale funding, we don’t want banks that are
over-exposed to wholesale funding markets.”
In other answers to the committee, the chancellor said he had no
plans to propose any changes to the Quantitative Easing decision-making
process.
–London Bureau; Tel: +442078627492; email: wwilkes@marketnews.com
[TOPICS: MABDS$,M$B$$$,MT$$$$]
