Reaction to BoE Governor King’s speech on banks

October 21, 2009

BRITAIN-BANK/    LONDON, Oct 21 (Reuters) – Bank of England Governor Mervyn King said a fundamental rethink of banking sector regulation was needed to prevent a recurrence of the financial crisis and floated the idea of splitting core aspects of banking from riskier speculative activities.  
   His views put him at odds with the Financial Services Authority which has so far focused on rebuilding banks’ capital and liquidity buffers. Britain’s opposition Conservatives plan to restore the Bank of England to the dominant role in financial regulation if they win an election due by June 2010.
   Following are some reactions to King’s speech:
   “We in government have been active proponents of the living will which will require some degree of separation within banks of their investment banking activity from their retail and commercial banking.
   “The reality of banks is that we cannot allow a system  in which the retail depositor is placed at risk … what we can do is to ensure that banks are structured to allow them to fail in terms of the investment banking activities.
   “The protection of depositors, particularly retail depositors, is a matter of national importance and one which the government will not in any way deviate from.
   “We are doing our part … to bare down on any tendency to go back to foolishness and recklessness. We are not going to see banks place the UK economy at risk again in the future.”
   “Mervyn King’s speech is powerful and persuasive. His analysis of how the Government’s system for regulating banks failed and how there has been ‘little real reform’ since is one I share.”
   “I don’t think we can continue to tolerate a system where the British government and the tax payer acts as guarantor of last resort to banks that are trying to operate on a global scale, often in very risky operations and I think that we have not yet bitten the bullet of deciding that some of these institutions are going to have to be broken up.”
   “Certainly from the UK industry’s perspective and those that operate here we have already moved to many of the new (global) standards even while we are waiting for them to be fully formalised.
   “It’s not just a question of competing globally. It’s also being able to provide locally the sort of finance structures that are particularly required by the larger businesses and companies. Actually some of those activities have to be undertaken even in the simplest retail banks if you are going to for example offer something liked fixed interest mortgages.” ((UK bureau,, Tel: +44 207 542 7947))
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 Wednesday, 21 October 2009 11:16:10RTRS [nLL180535] {EN}ENDS

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