financial crisis without the active involvement of the central bank. central banks are currently at the heart of efforts to restore confidence in the banking system by the provision of liquidity against assets which have proved to be highly illiquid. but the recent challenges presented by the latest episode of financial turmoil suggest that much hard thought will need to be given to the structure and nature of banking regulation in the future. in the longer - term, it seems extremely likely that banks and other “ near ” banks, especially those that have been regarded as similar to banks in terms of their eligibility for financial assistance, will be called upon to hold more capital and a greater quantity of liquid assets than hitherto. it is too early to foresee clearly where the long - term direction will go. but serious thinking and a willingness to contemplate radical change will be necessary.

mervyn king : how international cooperation can raise britain ’ s economic performance opening remarks by mr mervyn king, governor of the bank of england, at the panel on eu / us cooperation at the advancing enterprise conference, london, 26 january 2004. * * * chancellor, ladies and gentlemen, in this session we shall examine how international cooperation can raise britain ’ s economic performance. before introducing our speakers this afternoon, i would like to present a few facts about productivity in this country, and then pose three questions. you might ask why a central bank governor is chairing a panel on enterprise. well, some believe in prudence for a purpose ; we believe in stability as a spring - board, a springboard for enterprise. since the start of the railway age in the 1830s, output per person has increased ten - fold in britain ; it has increased twenty - fold in the united states. that is because over that period output per person rose on average by 1 ½ % a year in the uk and by 2 % in the us. the result is that the level of output per person is now around 25 % lower in britain than the us. in part this reflects shorter working hours, but it also reflects a lower level of productivity. from around 1980, however, the productivity gap between britain and united states started to close, and for the following 15 years or so labour productivity actually rose significantly faster in the uk than the us, at an annual rate of 2. 1 % compared with 1. 4 %. but since 1995, the gap has started to widen again as ict investment has boosted productivity growth in the united states. the empirical evidence suggests that one of the most successful ways to speed up convergence in productivity is to promote international trade and investment, and openness more generally. within manufacturing, the rate at which the productivity gap between britain and the us closed during the 1980s and early 1990s was greater in the more open than the less open sectors. against that background, let me suggest three areas for questions : first, why is the gap in the level of productivity between the us and the uk so persistent? and what are the obstacles that prevent the gap from narrowing - are they in the fields of trade, technology transfer, or flows of investment? what are the respective roles of business and government in removing them? second, can the uk benefit as much as the us from the it revolution? is it a question of the speed with which business adapts? or is it the need to fund our