BoE deputy challenges credit stance Paul Tucker, deputy governor of the Bank of England Paul Tucker, deputy governor of the Bank of England, distanced himself from Sir Mervyn King - whom he is favourite to succeed as governor - by calling on Tuesday for a review of the bank's stance against directly easing credit conditions. Mr Tucker also questioned whether regulations on bank liquidity were obstructing the effective functioning of quantitative easing, aimed at injecting money into the economy. As the favourite to succeed Sir Mervyn as governor next June, the two interventions are likely to be interpreted as signals that he would be a more flexible head of the bank. The willingness to think again about credit conditions will please the Treasury, which has been frustrated over the bank's unwillingness to consider policies to loosen credit constraints for households or small companies. In a lecture to investors in London, Mr Tucker outlined his view that rising funding costs for banks were caused by 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. Sir Mervyn, in contrast, has said any direct action to reduce bank funding costs or credit conditions for borrowers represented a government subsidy that the BoE could not countenance. "It is the role of the government to make a decision about a scheme that discriminates among different parts of the economy," Sir Mervyn said in February. Mr Tucker's speech also marked a significant shift in the way some UK regulators are looking at their liquidity requirements, which are the toughest in the world and require banks to hold stocks of cash and easy-to-sell assets against a potential crisis. For the first time publicly, Mr Tucker asked whether the rules - being emulated globally as part of the Basel III reform package - were hampering efforts to stimulate the economy by soaking up much of the extra QE liquidity. Mr Tucker's speech is likely to be welcomed by bankers and some members of parliament. Ministers will decide on the next governor in the autumn.