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Thursday, March 10, 2011

Bank of England chief under fire after warning Britain is at risk of another financial crisis

Britain at risk of another financial crisis, Bank of England chief warns

Mervyn King, the Governor of the Bank of England, has come under fire from leading economists after warning that Britain risks suffering another financial crisis without reform of the country’s banks.

Mervyn King said that “imbalances” in the banking system remain and are “beginning to grow again”.
But leading economists, including a former Tory advisor and the chief executive of the British Bankers' Association, have criticised his comments.
Tim Congdon, who served on the Treasury Panel of Independent Forecasters (the so-called "wise men") under the last Conservative government, called the remarks "unjustified".
He said: "The truth is the financial sector is very important to the British economy. He's been at the Bank of England for twenty years... I find it incredible that he's now attacking the structure of the industry.
"If you criticise the banks you reduce their credibility and then people worry about them. The important thing for the Governor of the Bank of England is to help them."

Angela Knight, chief executive, British Bankers' Association, said: "We view the Governor with the highest respect, but in this instance there are a number of points with which we disagree.
"The banking industry recognises that some of its number got it badly wrong during the crisis. Since then the industry has reformed radically.
"We work closely with our customers of all sizes and types and in doing so have created one of the largest financial centres in the world and a great contributor to the British economy. We achieved this together by doing our business well - not by doing it badly.
"We entirely agree that no bank should believe it can fall back on the taxpayer. The changes from top to bottom within the industry have ensured the risks are well controlled, and all banks have put recovery and resolution plans in place to answer the too-big-to-fail question and so safeguard customers and the taxpayer against the remote consequences of any future failure."
The Telegraph

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