“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.