Gordon Brown admits 'big mistake' on banks
Gordon Brown has admitted he made a "big mistake" on financial regulation before the banking crisis that plunged Britain into recession.
The former prime minister said the regulatory framework he put in place as chancellor failed to address the "entanglements" of different institutions and "how global things were".
Speaking at a conference in the US, Mr Brown said he accepted his responsibility for the mistakes, but added that he was not alone in making them.
His comments will be seized on by the Conservatives and Liberal Democrats as the coalition Government prepares to shake up the banking system and remodel financial regulation.
At an event organised by the Institute for New Economic Thinking in Bretton Woods, New Hampshire, Mr Brown said that in the 1990s and the years up to 2007, when he was chancellor, he was under "relentless pressure" from the City not to over-regulate.
"We know in retrospect what we missed. We set up the Financial Services Authority believing that the problem would come from the failure of an individual institution," he said.
Mr Brown said the economic problem had been seen in terms of inflation rather than financial stability.
He went on: "So we created a monitoring system which was looking at individual institutions. That was the big mistake.
"We didn't understand how risk was spread across the system, we didn't understand the entanglements of different institutions with the other and we didn't understand even though we talked about it just how global things were, including a shadow banking system as well as a banking system.
"That was our mistake but I'm afraid it was a mistake made by just about everybody who was in the regulatory business."
Mr Brown said people had been made to rethink regulation "in its entirety" in the aftermath of the 2008 banking meltdown.
"I have got to accept my responsibility and I do, and I have been very open about saying we made mistakes on that," he added.
"But in a world where the understanding of what global meant was incomplete, I think many writers as well as many regulators made exactly the same mistake."
Mr Brown also warned of a "race to the bottom" in terms of a return now to light-touch regulation.
"There should be an international agreement, otherwise you'll just have banks threatening to move from one country to another," he said.
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