Bank of England Governor Andrew Bailey expressed skepticism about the role of central bank digital currencies (CBDCs) in financial stability, emphasizing that central banks must maintain control over monetary transmission through the banking system.
Speaking at the University of Chicago Booth School of Business in London on Feb. 11, Bailey reinforced that while financial markets are evolving, the principles underpinning money issuance and liquidity must remain intact.
Bailey highlighted that non-bank financial institutions (NBFIs) are playing an increasingly significant role in global finance, prompting central banks to adapt their risk management frameworks. However, he made clear that this shift does not warrant broadening access to central bank money beyond traditional banks.
“There is no rationale for standing facilities for non-banks as they do not create money.”
Bailey said, signaling that the introduction of a digital pound would not alter the BoE’s core approach to monetary stability.
Undermining commercial banks
With several major economies exploring CBDCs to modernize payments and financial infrastructure, Bailey emphasized that any digital currency issued by the Bank of England must preserve the existing financial framework.
Bailey confirmed that the Bank of England is still studying the feasibility of a digital pound, working in collaboration with the UK government. However, he stressed that while digital technologies offer new possibilities for payments, the decision to introduce a CBDC must be based on clear economic benefits rather than speculative trends.
Bailey said:
“We must have it if it’s proven that we need it.”
While he acknowledged that a digital pound could serve as an additional payment option, he warned against undermining the fundamental role of commercial banks as intermediaries.
Bailey also stressed that the concept of central bank liquidity must remain bank-centric. He reinforced that a CBDC would not be intended to replace private-sector financial institutions but rather complement the system.
According to Bailey:
“The standing provision of liquidity to support the so-called singleness of money goes only to the banks.”
In January, the Bank of England announced plans to launch a “<
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Author: Assad Jafri
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