Leading article: Few signs of contrition from Sir Mervyn King

Despite everything, the Bank of England now has vastly expanded powers

Share
Related Topics

Whatever else it was, the Governor of the Bank of England's speech this week was not much of an apology. Sir Mervyn King's analysis of the financial crisis pointed the finger at banks, at regulators, at politicians; at an entire global system drunk on incomprehensible debts and incalculable risks, in fact. But although he acknowledged that the Old Lady of Threadneedle Street must accept "some" responsibility for going along with such a system, he as good as denied that it was within her powers to put a stop to it. Such an excuse must never be available to a Governor again.

Sir Mervyn's principal thesis is that although he and his colleagues could see troubles ahead, they could do little to steer Britain around them because the regulation of financial services was – thanks to Gordon Brown's 1997 reforms– no longer within their remit. Although the Governor did acknowledge that "with the benefit of hindsight, we should have shouted from the rooftops", by hedging the concession with claims that the Bank's power was limited to "publishing reports and preaching sermons", his strong implication was that even shouting louder would have made little real difference.

It is a pusillanimous defence. Sir Mervyn's primary responsibility may indeed have been monetary policy, but he was also charged with ensuring wider financial stability – a task at which he palpably failed. And as the head of arguably the most influential of all financial institutions, he hardly needed his own hand on the tiller in order to steer the debate.

To Sir Mervyn's critics, however, the Bank's sins of omission are still only half the story; its sins of commission are blacker still. The Governor may now admit that he should have shouted louder, but he defends to the hilt both the management of monetary policy in the run-up to the crisis and the responses once the storm hit. His detractors – and there are plenty of them – are less forgiving. Not only should the Bank have hiked interest rates earlier to curb the housing bubble and limit the exposure of, say, Northern Rock. It should also, once the trouble started, have acted faster to shore up failing banks, rather than losing precious time to ditherings about the dangers of moral hazard.

In the end, how far Sir Mervyn was culpable – and whether he apologises, or not – is largely immaterial. More important by far is what happens next. Despite its patchy record, the Bank has come out of the crisis with its sphere of influence vastly increased. There are good reasons that this is so. After all, reinstating its role as regulator of the financial services sector both creates the big-picture authority that was so manifestly lacking in the recent crisis, and also avoids a repeat of Sir Mervyn's primary excuse for the past.

The Governor set out a compelling account of the Old Lady's future this week, outlining with gusto her expanded regulatory responsibilities, plans to enable banks to fail without the state having to step in to save them, and commitment to restructuring the banking industry along the lines set out by the Vickers Commission. What he did not do was answer the central question as to why the Bank should be trusted to wield its vast new powers more diligently than it did its more limited old ones.

With the Governor due to step down next year, such doubts will mainly be met by his successor. There are already several names in the frame, including one deputy governor, one former Cabinet Secretary and a surprise outsider currently running the Bank of Canada. Sir Mervyn concluded his speech with the promise that the newly beefy Bank will "take away the punchbowl just as the next party is getting going". It can only be hoped that his successor proves more abstemious than he was.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Client Manager

£27000 - £35000 per annum: Recruitment Genius: A growing, successful, friendly...

Recruitment Genius: Property Negotiator - OTE £20,000+

£16000 - £25000 per annum: Recruitment Genius: This family owned, independent ...

Recruitment Genius: Sales Administrator - Spanish Speaking

£17000 - £21000 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Sales Administrator - German Speaking

£17000 - £23000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

Read Next
Wilbur, the pig who thinks he's a dog (Dom Joly)  

My hilarious pet pig Wilbur is more popular than I am — so I'll let him bring home the bacon

Dom Joly
 

Amazon's new 'payment by the page' policy will just result in longer but likely worse literature

Katy Guest
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'