Bank of England: Fintech ‘boosting UK’s financial resilience’
THE EMERGENCE of alternative finance and the growth of fintech have boosted the UK financial system’s resilience, according to the Bank of England’s deputy governor for markets and banking.
Speaking at the Society of Professional Economists’ annual conference on Friday, Dave Ramsden noted the widespread changes that have occurred in the financial markets since the 2008 credit crunch.
Although many have been driven by regulation, for example around banks’ liquidity, there have also been more organic changes, he said. These include the proliferation of non-bank sources of finance, the emergence of small banks and the growth of the fintech sector.
“These changes are driving new interconnections across a more diverse and genuinely distributed financial system, which, appropriately managed and regulated, is leading to real gains in resilience for the system as a whole,” Ramsden said.
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He claimed central banks have also changed in the size and reach of their balance sheets. The Bank of England’s balance sheet has grown tenfold since before the financial crisis from around £60bn to more than £600bn – equivalent to 30 per cent of gross domestic product (GDP).
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However, Ramsden admitted that real wage growth has been “strikingly weak”, falling by 0.5 per cent in the two years to the second quarter of 2018. This was more than four percentage points below the Monetary Policy Committee’s May 2016 forecast of 3.8 per cent cumulative growth.
“Given our forecasting history it would be foolish of me to rule out being disappointed on wage growth again – although developments over the past year have so far broadly matched our expectations, with private sector regular pay in particular now growing at three per cent, a little stronger than our forecast of a year ago,” he said.
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