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December 7, 2012 12:52 am
From Lord Davidson of Glen Clova.
Sir, Once again the Bank of England has been encouraged to enter into a currency swap with the People’s Bank of China, this time by a financial forum (“BoE urged to back renminbi trade”, December 5). Once again the result has been the usual BoE statement to the effect that somehow the time is not right.
For at least the last two years the BoE has been asked to engage in such a swap by the City, by reform-minded opinion in China and more recently from within the Treasury. No articulate explanation has been offered for the lack of action. Many central banks, including for example those of Japan, Australia and Brazil, have found no insuperable barriers to such swaps, on the contrary finding they are beneficial in improving trade relations with China. London’s role as the pre-eminent global financial centre is not well served by the BoE’s apparent intransigence. It acts as a fetter on the development of London’s renminbi markets. Nor is such intransigence easily understood in China.
Should not HMT now convert some portion of its reserves currently managed by the BoE into renminbi to break this apparent impasse?
Neil Davidson, House of Lords, UK
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