By Hugo Duncan
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Sir Mervyn King last night lambasted bankers for defending bumper pay and profits in the face of ‘essential’ reforms to the industry.
The Bank of England governor warned that the financial crisis ‘is far from over’ and pledged to take on ‘vested interests’ as regulators battle to prevent another disaster.
He also urged the Government to press ahead with plans to shake-up the financial system as recommended by the Independent Commission on Banking.
Warning: Mervyn King's broadcast was the first by a governor since Montagu Norman 70 years ago
‘It’s vital that parliament legislates to enact these proposals sooner rather than later,’ said King in the BBC Today programme lecture on Radio 4.
The reforms â€" due to be law by 2015 and implemented in 2019 â€" will force banks to ring-fence traditional retail banking from more risky investment or ‘casino’ operations.
‘We don’t build nuclear power stations in densely populated areas,’ said King. ‘Nor should we allow essential banking services and risky investment banking activities to be carried out in the same too important to fail bank.’
The governor complained of a ‘bad banking situation’ in Britain â€" echoing what US President Franklin Roosevelt said in 1933 after the collapse of the US banking system. ‘Some of our bankers have shown themselves either incompetent or dishonest in their handling of the people’s funds,’ said Roosevelt in his ‘fireside chat’ with the American people, replayed by King last night.
King said that taking on responsibility for the banks â€" alongside tackling inflation and supporting the economic recovery â€" represented ‘the biggest challenge the Bank has faced for years’.
‘We are up to the task,’ he said in the first radio broadcast by a governor since Montagu Norman more than 70 years ago.
‘Already we see vested interests rise up to defend their bonuses and profits. But we can resist those short-term pressures and take the longer view needed to prevent another crisis.’
King admitted that the Bank could have done more to prevent the last crisis and promised it will ‘take away the punchbowl just as the next party is getting going’. He called for banks to cut dividends and bonuses, and instead retain profits to cushion against potential losses.
‘The biggest risk to banks at present stems from the troubles in the euro area,’ he said. ‘The present crisis is far from over. Our own economy is still not back to health.
‘And despite efforts to stimulate the economy, the recovery is proving slower than we had hoped. It will come.’
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" King admitted that the Bank could have done more to prevent the last crisis ..." How do we know the current policy of near-zero rates +QE is any better. HMG BoE have been waiting for growth and falling inflation - savers and pensioners have been waiting for interest rates to rise. And there's no really good signs of either. Neither the politicians nor the Bank seem to realise 1. How deep a mess we are all in (correction- most of us are in); 2. How inept they are at fixing things. ..... It really is a National disgrace. I know incompetence isn't a crime; but there should be exceptions!
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The same bloke quantatively eased money into the banks hands at the expense of savers and the prudent. So now the reckless gamblers get their coffers refilled at our expense and he has the gall to try and cosy up to the very people he stitched up. I hope this particular hare gets eaten by the hounds.
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King,Brown,Blank,Daniels should answer for the merger between LLOY and HBOS. Still waiting for the FSA to report on that.
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I'm willing to bet that in the next 100 years there will be a virtual replica situation. There was a banking crisis in: 1700's, the 1830's, 1930's and 2000's! History repeats, the common factor among them all? Easy access to debt, distributed easily by lenders (banks) as stock markets rise and rise (assuming the good times last forever!) Past markets are linked - the problem is as the years progress the markets grow, each crisis just gets bigger and bigger but the underlying causes to those effects are caused by the same factors, time after timer after time - Nobody seems to learn though. Old Merv must be kicking himself though for being in office as this happened on his watch - he'll go down as a bad governor - whether he really was or not. The next one will have a couple of years of pain then whoosh good times and he'll no doubt try to take credit for turning things around - Don't be fooled, the markets can't be controlled
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How nice of Mr King to warn us grateful and ignorant citizens of the oncoming debacle. I wonder why he doesn't speak out at banks holding on to funds meant to be loaned to sustain and expand businesses and create employment. Especially since the money is loaned to these banks by the BOE.
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were doomed !
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We all expected the changes recommended by the Independent Commision on Banking to be put in place without delay, but this government made up of Toffs and the Bankers pals shirked their responsibilities by deferring this until after the next ellection, whereby any new government would not be committed to this decision and could just cancel the whole thing. The Banks lost all our money, then Brown stole our taxes to bail them out and this rotten government refuses to put the needed safeguards in place so their buddies can keep taking huge risks with our savings, to boost their bonuses. Why not make it law that if savers deposits can be used and lost in this way, that banks should be forced to share any profits they make with the people who's deposits were used. Let's have a two way street.
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Sez the man that has just handed the banks almost £400bn in QE, as he switches sides the view of the general public, 'they must believe that everyone is stupid!"
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