LONDON - THE head of Barclays Bank, which has announced thousands of job cuts in recent days, said Wednesday it was right for banks to apologise for the role they played in causing the credit crunch.

Barclays' group chief executive John Varley said banks must continue to lend in the face of the crisis and also supported greater action by the Bank of England as Britain seemingly moves towards zero interest rates.

Earlier this month, the central bank cut its key lending rate to 1.5 per cent, the lowest level in its more than 300-year history.

Barclays has cut more than 4,000 jobs in its retail, commercial and investment businesses in the last two days.

'When I think about the credit crunch that has occurred, there are a number of players in that drama,' Mr Varley said in an interview with Channel Four television.

'Is it right for the banks to take their share of the responsibility, is it right for the banks to apologise for... getting some big judgments wrong as we have over the course of the last years, is it right for us to acknowledge that? Absolutely it is.'

Mr Varley said it was essential that banks help with reconstruction to ensure that the crisis does not happen again.

'The worst thing that would happen to the world would be the sort of thing that happened in Japan 15 or 16 years ago where the banks were so gun-shy as a result of criticisms... they lost their willingness to lend,' he said.

'And you know what happened to the Japanese economy in the following ten years, it shut down.'

In the case of zero interest rates, the policy emphasis would shift to money supply and the United States was already moving in that direction, he said.

He added it would be 'quite a positive development' if the central bank were to buy assets, gilt and commercial paperwork as British interest rates fall ever lower.

'The world needs stimulus at the moment... and I would be supportive of that,' he said, while stressing that central banks have to be careful to avoid inflation. -- AFP