Haldane Says Crisis Shows U.K. Bank Exodus May Be No Bad Thing
Bank of England official Andrew Haldane said the departure of financial institutions from the U.K. to avoid tighter regulation may be “a price worth paying” for the sake of the economy.
“Some of the downsides of carrying around a big financial system are now evident to all,” the BBC cited him as saying in a radio interview to be broadcast today. “If some of that were to migrate overseas that would be unfortunate but given the costs of carrying that financial system around, it may be a price worth paying.”
Bank of England Governor Mervyn King has called for regulation forcing lenders to separate retail operations from investment banking to protect the economy from future financial crises. “Oligarch” bankers are wielding political influence to prevent such rules from being enacted, economist John Kay said in an interview last month.
“It’s true that the lobbying effort of the financial sector should not be underestimated,” Haldane, the bank’s executive director for financial stability, said in a transcript of comments to be broadcast on the BBC World Service’s Business Daily program. “Equally, the way to beat that back is by appealing to logic and to evidence.”
Haldane spoke in an interview marking the Bank of England’s semi-annual financial stability review, which today called for lenders to use improved funding conditions to buffer themselves against further shocks and brace for 1 trillion pounds ($1 personal loans for bad credit.6 trillion) in liabilities maturing in the next five years.
‘Exposed’ System
“Banks remain exposed to any future deterioration in macroeconomic and market conditions,” the central bank said.
Officials are trying to repair the financial system from the damage wrought during the crisis. Policy makers including King and Haldane are also considering what measures will be needed in future to prevent a repeat of the turmoil.
Haldane said that there is a need to “redirect” regulation because “those institutions that spread the risk disease furthest and in the biggest way ought to be subject to more stringent, and harder-hitting regulation up front.”
“There is not so much as a scintilla of evidence of bigger being better in banking,” he said, according to the BBC. “Bigger certainly isn’t better when the going gets tough. Bigger during this crisis has meant bigger bailouts, not better bailouts.”
Filed under: finance by Specialist