Paul Tucker, deputy governor of the Bank of England and likely successor to Sir Mervyn King, distanced himself from his boss yesterday as he called for a review of the bank's stance against directly easing credit conditions.
Tucker also questioned whether regulations on bank liquidity were coming in the way of effective functioning of quantitative easing, aimed at pumping money into the economy.
Given the likelihood of his taking over as governor next June, the two interventions are likely to be seen as signals that he would be a more flexible head of the bank, according to analysts.
The willingness to think again about credit conditions would be more than welcome to the Treasury, which is miffed with the bank's unwillingness to consider policies to ease credit constraints for households or small companies.
Addressing investors in London, Tucker presented an overview of the rising funding costs for banks that stemmed from the small but real risk that the euro might unravel – creating an ''extreme tsunami''.
''The banks themselves did not bring about the underlying challenges facing the euro area,'' he said. ''Given the costs to our economy, the authorities, including the BoE, need to consider what more we could do to alleviate tight credit conditions in the UK.''