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Sir Mervyn King says he's leaving Bank of England in 'safe hands'


Bank of England governor Sir Mervyn King said he was leaving the institution “in safe hands” as he signed off his final annual report before being succeeded by Canadian Mark Carney.

Sir Mervyn argued in his foreword to the report that actions taken by the Bank during his time at the helm had put the UK economy on the road to "gentle recovery".

But he insisted that controversial measures forcing banks to build up their balance sheets were necessary to guarantee sustained growth.

The Bank's Financial Policy Committee has told banks they must hold an extra £25 billion to guard against future financial shocks, but critics including Business Secretary Vince Cable say the move will depress the lending to small and medium businesses that is needed to get the economy moving.

Sir Mervyn defended his record, saying the Bank's Monetary Policy Committee (MPC) has had to "strike a delicate balance" on trying to boost the economy with inflation remaining above its 2% target due to energy prices, rail fares and tuition fees, but wage growth subdued.

He said the MPC had done a great deal to stimulate economic activity with the Bank rate at near zero for more than four years and expected to remain there "for many years to come", and quantitative easing of £375 billion representing around 25% of gross domestic product.

"The scale of the stimulus provided by the Bank means there are now good reasons to suppose that a gentle recovery is under way," Sir Mervyn wrote.

"But to support an improvement in credit conditions and ensure that recovery, confidence in our financial system must be restored. For that, our banks must be adequately capitalised."

Sir Mervyn, whose salary is £305,368, will retire with a £5 million pension pot paying him around £200,000 a year.

Mr Carney, who takes over on July 1, will receive £480,000 a year, plus a cash allowance of £144,000 in lieu of salary and a £250,000 accommodation allowance.

Sir Mervyn welcomed the new governor, saying: "He will bring great qualities and his own approach. I wish him every success and I know I am leaving the Bank in safe hands."

The 65-year-old has promised his wife that he will use his retirement to learn to dance, he told Desert Island Discs at the weekend.