In an apparent attempt to silence his critics at the Today Programme Lecture last night, broadcast this morning to Radio 4 listeners, Merv said he did not accept blame for the financial crisis, that he did not want to blame anyone in particular, but that ‘we should have shouted from the rooftops that a system has been built in which banks were to important to fail.’ That’s hardly a mea culpa, but certainly sounds like a tacit admission that he could have done more to help prevent the crisis.
The bulk of his argument however, centred on his view that banks need to keep profits in a reserve pot to insulate themselves against possible future losses. This is obviously an unpopular idea in the City, as it means a smaller divi for the shareholders, and smaller bonuses for the slickers. He said: ‘If banks and their shareholders have more to lose, they will be more careful in choosing to whom they lend.’
Critics say that in his capacity as governor of the Bank of England, King did have the power to do more than shout, that he could have done something about it if felt that ‘light-touch regulation’ was not enough in the period leading up to the meltdown. In particular, the bank could have reduced interest rates to deflate the property bubble. Sounds like a touch of the thankless task that is being a regulator. Does anyone seriously think it would have been popular had he tried to stop the party before the bubble burst?
Restoring some sanity to the financial sector inevitably will take time, but it’s going to be hard to rein it in whilst trying to get banks to lend to businesses and individuals again. Not only that, but if the eurozone troubles are not resolved soon, the worst may not yet be over. Soon though, this will be none of King’s concern, as his tenure comes to an end in June next year.
Merv did offer one tiny nugget of hope though, saying that the UK is seeing signs of recovery already and there will be slow and steady growth throughout 2012. Good news, but MT can’t hear any champagne corks popping just yet…