HIGHLIGHTS-Bank of England's King discusses financial stability

LONDON, Jan 15 (Reuters) - Bank of England Governor MervynKing and other members of the central bank's Financial PolicyCommittee appeared before a British parliament committee onTuesday to discuss their November Financial Stability Report. Following are highlights of their remarks. For a Reutersarticle about the November report, see KING ON DEALING WITH ECB: "In just the same way we have been able to negotiateunderstandings between ourselves and the United States in termsof how we might resolve global banks which span borders ... inEurope I think that kind of parallel would be a lot easier toreach with the ECB than it would be to reach separately with awide range of individual supervisors." KING ON ECB ACTION: "The actions of the ECB have been successful in calmingmarkets and in buying time. It's been very helpful. What itcan't do, because no central bank can do this, is to resolve theunderlying real challenges of either moving to a transfer unionor finding a way to take sufficiently effective measures tochange the competitiveness of the member countries of the euroarea. And in that sense, banking union is certainly not a magicanswer." MICHAEL COHRS ON AMOUNT OF EXTRA CAPITAL STATE-OWNED BANKSNEED: "It's hard to give you a number because it depends, itdepends on a whole bunch of things... It's a big number." COHRS ON RESTRAINING CREDIT: "I believe that if the party ever gets started again and wetry and take the punch bowl away there will be a huge row, andonly if we are seen as being highly accountable and have had alot of sessions will it be acceptable to you and yourconstituents." COHRS ON BIG GLOBAL BANKS: "I have said the banks have to explain to us, to the publicand to their shareholders what are the benefits of being globaland being large? In the absence of that explanation, and whyit's good for society and why it's good for the owners, I thinkthe banks are too big, I think that too big to fail is the keyquestion." ANDREW HALDANE ON UK BANK COMPETITION: "That's all with a view ... ultimately seeking to eliminatethat implicit subsidy, therefore levelling the playing fieldbetween the big guys and the smaller and medium-sized guys. Isthat adequate to enhance competition in the UK banking market?My view on that would be no." HALDANE ON SOLVING 'TOO BIG TO FAIL" PROBLEM: "'Too big to fail' and the implicit subsidies that followare a great one - perhaps the one great issue - and we have donea lot and may need to do more to get our arms around thatproblem, including requiring the biggest, most interested banksto hold more capital, including ensuring that they all haveadequate recovery resolutions." HALDANE ON CURRENT ACCOUNT SWITCHING: "For me there's a lot to be said for a transformationaltechnology of facilitating current account switch to improve theefficiency of the banking in this country and also of theproposition to customers." ANDREW BAILEY ON FLS: "What the introduction of the Funding for Lending Scheme hasalready shown us is that competition for deposits has eased offquite a bit actually, and that has been reflected in a change inthe rate paid on deposits." COHRS ON EMPLOYMENT TARGET FOR FPC: "I'm not quite sure how we would tie an employment targetinto our stability objectives, so I'm not quite sure how thatwould work... I can see the attraction of trying to find atarget but I'm just not sure an employment target would dovetailnicely with our objective on stability." COHRS ON REQUIREMENT FOR FPC TO SUPPORT GOVERNMENT ECONOMICPOLICY: "I don't think what has been put in place makes thiscommittee unworkable, but is it a concern? Yeah, I thinkprobably it is a small concern, but we can work it." KING ON FINANCIAL POLICY COMMITTEE: "I think it's worth a try given what happened in thepre-crisis period. But one has to admit that there is an elementof experiment. And we simply do not know yet what the publicacceptability of the use of these instruments by the FPC willbe." KING ON BASEL LIQUIDITY RULE: "It removes the uncertainty about what the regulation ofliquidity would be and in itself I think that's a very goodthing. "And we've removed the uncertainty by implementing the LCRin a way that should not constrain the ability of banks tofinance recovery."