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King attacks banks on reform

Bank of England Governor Mervyn King yesterday attacked the UK banking industry over its failure to reform even after receiving taxpayer support.

The Governor said that the near-£1 trillion spent to help shore up the industry was a “breathtaking” amount, and that the public would be paying for the crisis “for a generation”.

Mr King said: “To paraphrase a great wartime leader, never in the field of financial endeavour has so much money been owed by so few to so many.

“And, one might add, so far with little real reform.”

His comments come as City firms prepare for high levels of bonus payouts, helped by rising stock markets and a lack of competition.

Last week investment bank Goldman Sachs said it had put aside £10.3 billion in compensation and benefits for staff for the first nine months of 2009 alone.

At a speech to business leaders in Edinburgh, the Governor said the current arrangements were impractical and added that “it was hard to see why” support could not be limited to retail banking.

He said banks should not be encouraged to earn their way out of state support by “resuming the very activities which got them into trouble in the first place” and called for a “serious review” of how the banking sector is regulated.

“Although there are no simple answers, it is in our collective interest to reduce the dependence of so many households and businesses on so few institutions that engage in so many risky activities,” the Governor said.

Shadow chancellor George Osborne said: “Mervyn King’s speech is powerful and persuasive. His analysis of how the Government’s system for regulating banks failed and how there has been ‘little real reform’ since is one I share.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .