BoE governor bemoans lack of banking reform

by Gill Montia

Story link: BoE governor bemoans lack of banking reform

The Governor of the Bank of England has criticised UK banks’ lack of reform despite “breathtaking” taxpayer support.

Speaking to a gathering of Scottish businesses representatives in Edinburgh, Mervyn King called for banks to separate their retail businesses from riskier areas of operation, such as the high risk trading once the preserve of investment banks.

His argument hinged on the dangers of banks becoming too big to fail by resuming the kind of activities that resulted in the current financial crisis but nevertheless remaining candidates for government support because collapse would be unthinkable.

Mr King challenged the view that regulation and bigger capital buffers could replace “real” reform in the UK banking sector and made it clear that he believes taxpayer support should be reserved for retail banking operations, such as the protection of consumer deposits.

Summing up, he said: “Anyone who proposed giving government guarantees to retail depositors and other creditors, and then suggested that such funding could be used to finance highly risky and speculative activities, would be thought rather unworldly. But that is where we now are.”