HIGHLIGHTS-Bank of England's Carney speaks in parliament

LONDON, Oct (HKSE: 3366-OL.HK - news) 25 (Reuters) - Bank of England Governor Mark Carney spoke to a committee of lawmakers from the House of Lords in Britain's parliament on Tuesday.

Below is a selection of his comments.

UK NEEDS FLEXIBILITY TO ADJUST FINANCIAL RULES

"Because the UK financial sector is what it is, it's the most complex, it's the biggest relative to the economy, it's the most important by orders of magnitude in Europe and to some extent the world, we need the flexibility to go a little bit farther sometimes, to adjust those regulations in a way that helps protect the domestic economy from the scale of that financial sector. So we wouldn't want to have, ultimately Parliament's decision, but we wouldn't want to have our hands tied to import ad infinitum rules that were made elsewhere."

CANNOT SEE SCENARIO WHERE FINANCE MINISTER WOULD BLOCK QE

"I can't conceive of a circumstance where the MPC would choose to pursue additional QE if it were not in the best interests of achieving its remit, and nor under those circumstances can I conceive of one where the Chancellor would not provide that indemnity. Now (Frankfurt: 11N.F - news) that's a decision of the Chancellor of the day, but I refer you to the comments he made earlier this afternoon."

CONCERNS ABOUT RISKS IN GLOBAL ECONOMY ARE ELEVATED

"Pessimism about future growth prospects relative to historic rates is quite high, expectations of future growth have steadily come down after serial disappointments, and concerns about risks in the global economy are quite elevated. So the constellation of asset prices is consistent with a low growth environment with downside risk. That's true of the United States, it's true of Europe, and unfortunately at the moment it's true of the UK as well."

GLOBAL FINANCIAL RULES, EU/UK EQUIVALENCE

"We're not going to come to an open global and resilient financial system by having everyone applying exactly the same rules in exactly the same way with exactly the same supervisors. We're not going to have a supra-national treaty for the financial system. But we are going through a series of processes to agree high global standards across a wide range of areas and then applying those standards in a way that is either a form of equivalence or substituted compliance to use the American term. That is the way forward for the global financial system.

"We have an opportunity, which has a number of economic reasons behind it as well, it would be in everyone's interest in Europe as well as the United Kingdom to come to this agreement, but we have an opportunity to put this in place. We start equivalent, we know each other as regulators, we have the sophistication here, and if we can work through an arrangement which draws on existing legislation that affects wholesale financial services and then asset management, what would be expected would be just to be treated the same as other third countries in terms of particularly portfolio delegation. That's the core of a potential model."

BANK WOULD NOT SLAVISHLY RELY ON QE

"The package that we put in place in August had four elements to it, to provide stimulus through different channels, and also to show that the Bank would not slavishly rely on QE if additional stimulus were to be required."

BOE NOT INDIFFERENT TO EXCHANGE RATE

"The balance of supply and demand in the exchange rate can shift, and we're not a targeter of the exchange rate, we're a targeter of inflation. But we're not indifferent to the exchange rate. And we have seen in recent weeks fairly subtantial moves in the exchange rate that to some extent appear to be related to an adjustment in market perceptions to that balance of supply and demand in the future."

MARKET PERCEPTIONS ON BREXIT DRIVING STERLING MOVES

"Sterling starts to really move as it becomes clearer the timing of the Article 50 triggering, and the market's perception, and I really underscore it's the market's perception, of what the potential relationship will be between the United Kingdom and Europe. It's a bit early to be making those determinations because the Prime Minister has been very clear that it will pursue an orderly Brexit, that we'll get the best deal possible, that there have been no negotiations thus far, there's no running commentary on specifics, so it is a perception of the market, but it is a perception they have made.

"That perception influences a perception of where the supply potential of this economy will be in the next few years, in the immediate aftermath.

"As I've tried to make clear, that perception may well be mistaken, what we have to address as a committee, what we have to take into account as a committee is where sterling is and how persistent it likely is to be. So I would suggest that the movement in the currency has been, the 6.5 percent move in the currency in the last few weeks since the Conservative Party conference, has largely been driven, these things are never exclusive but it's largely been driven by a market perception of a fundamental factor, not a shift in the stance on monetary policy. In fact the market perception of the stance on monetary policy in that period has been to remove again in the market's view the prospect of an additional rate cut by the Bank of England."

IMPACT OF COMMENTS BY LAWMAKERS ON BOE

"Markets have taken note of some of the comments but there's no consequence of those comments for what matters, which is how individual members of the MPC will discharge their responsibility. We're very clear on what our remit is and unless it is changed by parliament we have an obligation to discharge it. So we will conduct monetary policy to return inflation sustainably to that 2 percent target."

MONETARY POLICY HAS BEEN MAIN VEHICLE TO PROVIDE STIMULUS

"Monetary policy in most advanced economies, this one included, has been for some time the principal if not the sole vehicle to provide stimulus and support for adjustment, initially following the financial crisis, then subsequently following other shocks to the economy, in the case of the UK principally negative shocks coming from the European Union."

RESETTING OF BURDEN BETWEEN MONETARY, FISCAL POLICY

"Monetary policy has been in many respects overburdened in terms of providing support to the economy. Again, the government has signalled some resetting of that relative burden between monetary, fiscal and other policy, and that is welcome. But that's entirely the decision with respect to the conduct of those other policies of the government, not the Bank of England. The Bank of England's job is to take the sum of the government's policies, both here and abroad, shocks from abroad, and then conduct monetary policy in fulfilment of its remit."

INTERFERENCE WITH BOE WOULD HURT UK ASSETS

"One of the great innovations in monetary policy has been an innovation of the United Kingdom in setting up this framework. This framework where parliament as sovereign decides what the bank should do, achieve price stability, the government of the day defines what price stability is in its eyes, and then the operational independence is given to an independent committee, nine individuals in the case of the Bank of England, individually accountable, to make the decisions on how to achieve that remit. That process has stood the test of time, that process is the process that the BoE is following and if it were to be called into question, one would expect to see the emergence of a risk premium around a range of UK assets, it would be most prominent around the currency, in gilt markets, in inflation expectations."

WHETHER TO EXTEND TIME AS GOVERNOR A PERSONAL DECISION

"I want to find some time to reflect on it [the decision whether to stay at BoE past 2018]. Secondly to be absolutely clear it's an entirely personal decision. It is entirely personal, and no one should read anything into that decision in terms of government policy, actual, imagined, potential, past, etc. It is an absolute privilege for me to have this role, I fully recognise it, like everyone I have personal circumstances that I have to manage. This is a role that requires total attention, devotion, and I intend to give it for as long as I can. But those are the only factors." (Reporting by Helen Reid and Estelle Shirbon)