Barclays' Varley backs "judicious" Bank easing

LONDON (Reuters) - The chief of Barclays (BARC.L) said he was in favour of a short burst of "judicious" quantitative easing to help prevent an economic shutdown.

But Chief Executive John Varley warned that caution would have to be taken against the potential risk of inflation from printing money.

"As an example, were the Bank of England to buy assets, were it to buy commercial paper, were it to buy gilts, were it to be active in the market in the way that I see the American authorities being active in the market; I think that would be quite a positive development," he told Channel 4 news.

"In these circumstances, I am in favour of quantitative easing. Now does it have to be judicious? Do central banks have to be incredibly careful about the duration of that activity to avoid the inflation risk? Absolutely, they do.

"But does the world need stimulus at the moment? Whether that is tax stimulus for savers, or whether it is this sort of easing? Now the world needs that -- it needs a short burst of it -- and I would be supportive of that."

But he was not in favour of the creation of a "bad bank" to buy up "toxic debt."

"I think it is something that has been discussed," he said. "I think it is something that, interestingly, America appeared to move substantially in that direction and then backed off. I don't think that structure is the best way to help create a thaw in the market."

Varley believed the government's bail-out of some of the country's banks last October was a success.

"The system was close to crisis and the whole of the system needed to be rescued and the government took trenchant action," he said.