Some banks are still too big to fail, the governor of the Bank of England has warned.
Mark Carney said that, while many people working in the UK’s financial services sector now assumed this was no longer a cause for concern, it still was to ordinary people.
The governor said that memories of the financial crisis and how close some banks came to collapse were still very strong.
He said: “The one big public narrative in this country is…in ending too big to fail, because that process is not complete.
“If you’re (a central banker) in the UK and the US, it’s almost all you’re focused on.”
Mr Carney said he and a number of other senior colleagues would be taking part in a public forum in Liverpool in a few weeks and that they were guaranteed to be questioned on the subject.
Image: Canary Wharf is home to many top banks including Barclays
He added: “Everywhere I go I am asked ‘when are you going to end too big to fail and the fundamental unfairness’.”
The Governor said he expected the financial crisis would remain rooted in the folk memory of the British public in the same way that, decades after the hyper-inflation of the 1930s, Germans remain obsessed with inflation.
He added: “Just like there’s a German narrative around price stability, there is very much a financial stability narrative (here) and, even if in this Square Mile people think they have moved on, that is absolutely not the case in the country.”
Speaking on the second day of a conference to mark the 20th anniversary of the Bank receiving monetary independence, Mr Carney said concerns over ‘too big to fail’ was why the Bank went to such lengths to publish the results of its annual stress tests on the banking sector.
He said it was important to “shed light” on the Bank’s stress testing to highlight that “the core of the (UK financial) system is able to withstand very big shocks” and that one of the biggest tests for the Bank was to carry on applying such stress tests even when the financial system appeared to be resilient.
Mr Carney added: “Our informed judgement, we made this call two years ago, is that the banks were getting to a position at the time, and now they’re above it, that as a group they are adequately capitalised for very severe stress. That’s important.
“We need to put ourselves in a position that we can say that, day to day, the institutions can function and lend.
“On the too big to fail point it’s absolutely incumbent on us to be clear that we have all the tools in place to end too big to fail, and that we are making a lot of progress on it but we haven’t yet done it for the major institutions.”
He said the Bank was trying hard to change and improve the way it communicates with the public and that it was not enough for “the middle-aged man in the blue suit” to make speeches.
He added: “We’re not being seen as high priests, all-knowing, we can’t do that, we’re lousy at it, there’s no sense trying.
“We have to be sentient and aware of what is going on – this is the worst performance for real wages (growth) in this economy since Marx was writing Das Capital, to put into context what is going on, although that is not to say we can prescribe how to fix it.
“I say that because one of the great shortcomings or sins of the financial sector is not to recognise its ultimate transmission to the real economy.
“That’s where you often get into trouble – not recognising you’re a servant of the economy in the private financial sector and we (at the Bank) fall into that as well.”
Mr Carney also made a joking reference for his planned departure from the Bank in 2019 when he suggested he would be “back in my log cabin in a couple of years”.
He was speaking hours after it emerged that the economy grew more slowly earlier this year than previously thought.
The Office for National Statistics said the economy grew between April and June at a year-on-year rate of 1.5%, rather than the 1.7% previously reported, representing the weakest quarter of growth for the economy since the first three months of 2013.
The ONS said that, while business investment grew more strongly than previously assumed, household spending continued to slow down.
Source: Sky News