Banks could take several more months to reveal their full losses arising from US sub-prime mortgage lending, but they are moving in the right direction, Bank of England Governor Mervyn King said today.
Stock markets tumbled yesterday following the resignation of Citigroup boss head Charles Prince after the bank said it had suffered huge losses. King said that while the situation had improved since August, it was not without risk.
'I think most people expect that we have several more months to get through before the banks have revealed all the losses that have occurred, and have taken measures to finance their obligations that result from that, but we're going in the right direction,' he said.
King has come under fire for his handling of the financial market turmoil this summer which resulted in a run on Northern Rock, Britain's fifth biggest mortgage lender, which only stopped after the government guaranteed retail deposits there.
Some critics have also blamed him for halting a takeover of Northern Rock, but King said it was British finance minister Alistair Darling who had the final veto on any early sale of the mortgage lender.
Media reports say that Lloyds TSB had offered to buy Northern Rock before the lender had to seek emergency help, but had wanted a £30 billion loan to do so. King also defended his decision not to act sooner when Northern Rock came under pressure.