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Heads of major UK banks meet Bank of England governor

20/03/2008

The heads of the major UK banks have today held talks with Bank of England governor Mervyn King.

A statement from the Bank said a pledge to continue "close dialogue" had been agreed upon.

"Representatives of the UK banking industry met today with the Bank of England for a regular meeting to discuss current market conditions and the Tripartite consultation document on financial stability and depositor protection," the statement said.

"The Bank of England and the banks agreed to continue their close dialogue with the objective of restoring more orderly market conditions."

The banks had reportedly been planning on telling Mr King that more needed to be done to reassure creditors that the Bank of England will intervene if help is required.

The meeting came amid global financial concerns sparked by the announcement that US bank Bear Stearns is to be bought by JPMorgan Chase.

Today's talks coincided with the FTSE 100 closing 0.91 per cent down, with Tuesday's 0.75 per cent interest cut from the US Federal Reserve initially failing to steady markets.

On Wednesday it was announced that the UK's financial watchdog, the Financial Services Authority (FSA) would be launching an inquiry into whether traders had spread false rumours in order to undermine certain banks' shares.

HBOS, whose shares plummeted as much as 17 per cent during trading yesterday, were forced to release a rare statement categorically denying the bank was suffering any funding problems.

"There has been a series of rumours in the market today [Wednesday]," a HBOS spokesman said.

"A number of ill-founded and malicious rumours about the UK banking system in the markets.

"These rumours have not a shred of substance whatsoever. They are lies."

The Bank of England also moved to reassure investors that the rumours were untrue.

The British Bankers Association reportedly announced that senior members would be meeting with the Bank of England on Thursday to discuss Britain's financial system, the current economic climate and investigate whether investors had been spreading the rumours to make a profit.