Sir Mervyn King: more right than most, but still badly wrong

Sir Mervyn King, Governor of the Bank of England, is nothing if not stubborn. He was never going to admit any more than tangential responsibility for the financial crisis. Yet when it came, his first mea culpa of any significance for the worst peacetime recession since the 1930s was so de minimis as to be barely perceptible.

Yes, he should have shouted louder about the build-up of leverage, he admitted in his Today programme lecture – in the circumstances, the least possible he could have coughed to – but on the question of blame, there was only the familiar list of culprits and old excuses to be had.

In any case, Sir Mervyn didn’t want to dwell on responsibility. Rather, he wanted to move on, and focus on the need for root-and-branch banking reform so that such crises can never happen again. Now coasting down to his retirement in just over a year’s time, this is indeed how Sir Mervyn would like to be remembered – as the great reformer. I doubt posterity will be so kind.

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Sir Mervyn King admits BoE failed over financial crisis

“We did preach sermons about the risks. But we didn’t imagine the scale of the disaster that would occur when the risks crystallised,” he said.

“With the benefit of hindsight, we should have shouted from the rooftops that a system had been built in which banks were too important to fail, that banks had grown too quickly and borrowed too much, and that so-called ‘light-touch’ regulation hadn’t prevented any of this …

He said the Bank “tried, but should have tried harder” to persuade everyone of the need to recapitalise the banks sooner and by more.

However, he claimed the Bank was hamstrung by the decision to move regulation to the Financial Services Authority (FSA) in 1997 – a reform “that would return to haunt us”. It left the Bank with the limited power of “publishing reports and preaching sermons”. Regulation is now being moved back to the Bank.

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