Seven years after the financial crisis, public trust in the industry is far from being restored, the Governor of the Bank of England has warned.
Mark Carney, speaking at an “Open Forum” for the Bank at London’s Guildhall, said that although “great strides” had been made in making the financial system more resilient since banks almost collapsed in 2008, the British people’s confidence was still lacking, not least due to the plethora of recent rate-rigging scandals.
“The twin crises of the solvency and legitimacy of finance undermined trust in market mechanisms and the effectiveness of the financial system,” the Governor said. “It is hardly surprising that only a third of people believe markets work in the interests of society”.
Mr Carney also noted that public attitudes towards finance were stubbornly negative. “The more people see, the less they like. People trust markets less with age,” he said.
That was echoed by the Chancellor, George Osborne, who also addressed the conference. “The idea that just a couple of years on you can go: ‘Oh well, let’s forget about all of that,’ and move on is a bit optimistic,” the Chancellor said. “It’s going to take time and the financial services sector, and indeed in the regulators and the politicians responsible, have to prove to the public that things really have changed.”
But in a sign the Bank might be rethinking its approach to regulation of the financial sector, possibly in line with the Government’s expressed desire for a “new settlement” with the City of London, Mr Carney said that he was open to suggestions of how it could do things differently.
The Governor said that the Open Forum – in which bankers rubbed shoulders with academics, religious leaders and trade unionists – was a chance to “take stock and reflect: not just on our achievements but on what we might have missed, overdone, or simply got wrong”.
Bankers and other financiers complain that the volume of new regulation coming out of the Financial Conduct Authority and the Bank of England in recent years is making their jobs impossible and even harming the real economy.
The Open Forum was addressed by the president of the European Central Bank, Mario Draghi, who made a defence of the principle of pan-European regulation of continental capital markets.
“Cross-border markets create a community of interest from which each member stands to benefit,” he said. “But they also heighten shared exposure to the potential detriment of all. So for markets to be truly free, they need governance.”
Some 400 people attended the Open Forum, which held sessions on topics such as the “social licence” of financial markets and how financial technology, or “fintech”, can help the economy. About half secured their places through a public ballot.
Gillian Guy, the chief executive of Citizens Advice and a member of the Banking Standards Board, said she was struck by the misplaced optimism from many of the financial sector representatives at the forum about the state of the industry. “There’s a real gulf between the industry and the general public. And polling shows it’s people who are most distant from the industry who have least confidence in it,” she said.
But despite noting the depths of public mistrust, Mr Carney sounded a bullish note on the effectiveness of the Bank’s reforms. “The era of heads-I-win, tails-you-lose capitalism is drawing to a close,” he said. “Complex webs of derivatives are being simplified and made safer. We are also working to turn the tide of ethical drift.”
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