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Is entente impossible between governor and banks?

Robert Peston | 10:42 UK time, Saturday, 5 March 2011

Mervyn King's interview with the Telegraph shows that the intellectual and emotional gap between the governor of the Bank of England and the UK's big banks is now of almost unimaginable size.

His view of what they do and how they do it is a universe away from their own self-image.

It is where he compares the banks with manufacturers that he is particularly damning.

Many manufacturers, for King, " care deeply about their workforce, about their customers and, above all, are proud of their products". But what about banks? "There isn't that sense of longer-term relationships. There's a different attitude towards customers. Small and medium firms really notice this: they miss the people they know," he says.

The financial industry, he claims, is poisoned by the idea that "if it's possible to make money out of gullible or unsuspecting customers, particularly institutional customers, that is perfectly acceptable". And he contrasts that attitude with decent businesses which "keep a clear vision of who their customers are, and are run by people who don't think they should simply maximise profits next week".

He also returns to his theme of the investment banks as gamblers in a casino, complaining that over the past 25 years, banks have increasingly "taken bets with other people's money" and where the "the rules of the game are that they get bailed out if it all goes wrong".

In the frantic taxpayer-subsidised casino, all trust between the players evaporated: "Financial services don't like the word 'casino', but instruments were created and traded only within the financial community. It was a zero sum game. No one knew which ones were winners when the crisis hit. Everyone became a suspect. Hence, no one would provide liquidity to any of those institutions."

Anyway, I've written countless times about how he and his colleagues at the Bank of England believe passionately that the guarantee to big banks that they'll always be bailed out by taxpayers has to be removed - as a necessary but not sufficient condition for making the financial system stable, robust and socially useful.

King is looking to the Banking Commission to come up with the requisite reforms (see earlier posts for what he and the Commission have in mind) and then to the Chancellor of the Exchequer to show the resolve to implement such reforms, in the teeth of an inevitable response from the banks that a great British industry would be imperilled.

But for me the significance of his remarks on this occasion are rather different.

Sustainable economic recovery in the UK requires the banks to regain some sense of confidence in who they are and what they do. They would argue that this project isn't helped when they are vilified by arguably the most important figure in their lives.

Not only is Mr King the individual who - more than any other, through the power of the Monetary Policy Committee to set interest rates - will determine whether their over-borrowed customers will be able pay their debts in the coming uncertain months.

He is also shortly to become the most important influence over whether new dangerous bubbles are pumped up and over the monitoring of risks taken by individual banks - because the government has decided to transfer to the Bank of England what is known as macro-prudential regulation and micro-prudential regulation.

According to the recent Treasury paper on regulatory reform, the governor will chair the new Financial Policy Committee, which will assess whether banks in general are behaving in dangerous ways, and the new Prudential Regulation Authority, which will monitor whether individual banks are taking excessive risks.

He will be, without any near challenger, the most important person in the lives our banks. So it matters that he appears to have so little respect for them.

Those who run the banks go further, and allege that he doesn't understand what they do. Some of the things that board members of banks have said to me about Mr King are unprintable.

Plainly it would be unhealthy for there to be a chummy relationship between the individual charged with keeping the banks in order and the banks themselves, between the headmaster and students, between the governor and governed.

There are many who believe that one of the greatest flaws in the regulatory system that's being swept away is that the Financial Services Authority in the few years before the Great Crash of 2008 was simply too respectful of the big banks and their boards.

But whether it is optimal for there to be this degree of froideur and mistrust between Mr King and the banks, well that is by no means obvious.

Comments

Page 1 of 3

  • Comment number 1.



    Got it in one.

    Go to it My King!

  • Comment number 2.

    So how come, an banking official, (soon to be) responsible for our banks, is able to tell it like it is, but a government minister ( Vince) is not able to do the same for the Murdock empire?

    Why can't our (and any) goverment, govern this country for the benefit of this country?

  • Comment number 3.

    It would seem to be all dangerously left wing stuff, someone taking on the Banks. Whatever next, the Law Society? The Police Federation?

    I can only wish Mr King well, as I'm quite sure most Big Bank customers and tax-payers will. More power to you, sir!

  • Comment number 4.

    Glad to hear this from Mr. King.

    I think the wider issue is shareholder value maximisation. Perhaps rules should be put in place to require companies to have a majority shareholder, require CEOs to have a significant stake and/or require shareholders to hold on for a certain amount of time.

    www.tmmblog.co.uk

  • Comment number 5.

    Nice to see Mr King speaking out loud and everyone, except bankers and politicians, would agree with every word he said. The sooner the BOE get back to regulating the banks the better.

    One thing that has to change however is the method of regulation. There is a reason the drug squad turn up at a drug dealers house at 6am and knock the door in. If they sent the drug dealer a letter a month in advance they would never find any drugs at all, but this has been the method of regulation since the FSA was set up.

  • Comment number 6.

    At last, someone is beginning to tell it like it is. Ordinary, hard-working and conscientious people are losing their jobs and it is down to greed and greedy people in the banking industry. Jobs are being lost so that the banking industry can continue to pay out obscene bonuses. There is anger in the country but the media continue to fail to reflect it.



  • Comment number 7.

    Big banks or small banks, it does not matter, customers who have ordinary accounts with high street banks have the right to be sure that their money is safe and instantly withdrawable. The practice of banks lending depositors' money so that it cannot be instantly retrieved, without explaining to customers the risks they are taking, should be illegal.

    Banks assume that only a small proportion of their depositors will want their money back at the same time. Bank runs can and do occur, so this assumption is false. If banks are going to gamble in this way with depositors' money, they should warn them of the risk, and only use deposits in this way when customers have explicitly agreed.

    If customers were informed of the risk in this way, there would no longer be the need for government bailouts.

    Another advantage would be that private banks could no longer create as much money as debt, making it much easier for the BoE to control the money supply and inflation. The banks would become less profitable and pay less tax, but the profits they formerly made by creating money would be made instead by the publicly owned BoE, so that the Treasury would receive the whole of the profit not just a proportion as tax.

  • Comment number 8.

    The UK banking debate always seems to be structured by the existing banks that we have ... just like the entire economy is there because they are there ... this is fundamentally wrong ... we can gradually pulverise the existing British back stabbing banks and replace them with better British focussed banks ... answerable directly to the BOE/FPC/TSC/ British based manufacturers etc

    Make them accountable for their investment decisions and penalise them for not putting Britain first.

    In practice, this means that British banks would need to have a new investment strategy approved for their primary investment in British agriculture, alternative energy, gas production, re-cycling, Trident alternative, full UK transport electrification ... all these policies would turn Britain into a real tiger economy ...

    I'm afraid that what I've heard so far about the March 2011 budget do not impress me at all ... Enterprise zones can be useful but are 'peanuts' in the context of Britain's problems with its banks, slump, debts ... and while the talking point may be bonuses ... the real probelm is in their use of UK captital and under-investment in Britain.

    Any bank that does not invest heavily in British infra-structure should be taxed off to e.g. China if they think the Chinese will grant them the 'over-privilege' that they seem to think is their privilege by right.

    The new banking structure should deliver a hybrid UK economy with massive capital investment in e.g. British alternative energy supplies so that we can e.g. taken on large UK capital projects and largely give up using carbon fuel. The new banking structure needs to provide a measure of protection to the British economy and for this to be led by banking investment ... keeping capital in the UK and attracting some new capital from overseas ... Britain has to compete for some capital ... but should stop losing most of 'our capital'.

    Britain must go its own way on these things ... we have to stop doing ridiculous comparisons between e.g. UK and USA etc ... we have to do things our own way, be self sufficient and sustainable as we have few natural resources besides grass, wind, rain, sun and some oil and coal.

    The main thing the Chancellor can do in the budget is to slash VAT and replace the lost revenue with some carefully weiged and targeted import tariffs ... if this isn't done ... kiss goodbye to our politicians' idiotic notion of timely and sufficient growth and recovery ... and of it being of a magnitude that can keep the current Coalition govt in office, for another 4 years.

    GO ... big slash for VAT please ...

    Mervyn King whatever's happened to him ... he's starting to talk some sense? If he keeps talking like that he'll have a 'recovery' on his hands

    P.S.
    I don't bash bankers but I'll nick their spam sandwiches!

  • Comment number 9.

    And?

    What are we going to do about it?

  • Comment number 10.

    Mervyn must know he is simultaneously treading on unsteady ground and his betters' mates' toes.
    Ever since his lecture at the Buttonwood Gathering last year-

    http://www.bankofengland.co.uk/publications/news/2010/082.htm

    I thought his card had been marked.

    Alternatively we really are in the poo.

  • Comment number 11.

    He is spot on! The relationship between bank and customers has all but eroded and they see us all as numbers on a spreadsheet. The danger of the customer being seen as a commodity and the new sophisticated financial instruments like derivatives have meant that they really do not care about the service they offer, whether their charges are fair or if they are lending irresponsibly. They are only interested in the "bottom line". Essentially the guarantee has to be removed but that means all of us have to be more careful about where we put our money. Since the banking crisis I no longer just use one institution and am looking more to supermarket savings accounts and building society savings(limited though they are) and national savings.

  • Comment number 12.

    King should simply shut up. His job is controlling money supply not criticising the current borrowing morality.
    As before, he's hopelessly slow. He said he should have acted more forcefully over the extent of leverage. Why the heck didn't he? Shouldn't he be acting now against high inflation. Of course he should but he won't. He is just too slow.

    He should simply leave the banks alone, merely checking they're working to regulatory standards, as in the pre-thatcher era when banks had to submit fortnightly, monthly and other reports to the B of E.

  • Comment number 13.

    Isn't this a bit like saying:

    "Some journalists rush to print the Scoop before thinking of the wider consequences of their printing"

    Does Nothern Rock ring any bells Mr Peston?

  • Comment number 14.

    I think Mr King knows exactly what the banks do and he like everyone else in the country who does not work for a bank thinks they need to change their attitude. The banks took stupid risks paid huge bonuses for short term gain and then when it all fell apart the taxpayers had to bail them out. Then as soon as taxpayers did that they went back to doing the same things again. They did not learn from their mistakes because their mistakes did not have a negative outcome for those who made the mistakes. That situation must be changed or it will just happen again. I think the bank should be split up so that those parts that the country needs to function day to day can be better regulated and protected. Those gambling casino parts can fly on their own and if they get it wrong they can be allowed to fail without taking the rest of the country with them.

  • Comment number 15.

    RP : "Those who run the banks go further, and allege that he doesn't understand what they do. "
    +++++++++++++++++++++++

    And the people who run the banks think THEY understand?

    I do not think they do. This whole mess has been caused by a lack of appreciation of the risks of a derivative implosion. It looks like we will have another more serious implosion because the issue has not been tackled.

    I wish Mr King well. He has already risen above my previous opinion of him. He needs to tighten the regulators and make them aware of the actual risks. He could also invite the rating agencies to a bum-kicking party on the same issues.

  • Comment number 16.

    I note that the banks have a new apologist-in-chief: Prof Tim Congdon (whatever happened to Angella?). He's apoplectic this morning - good. Well done Mervyn!

  • Comment number 17.

    I just dont buy it.

    Harsh words traded in lieu of action on regulation and bonus.

    King is in the pocket of cameron and osbourne. If not base rates would have shifted long ago.

    Farce.

  • Comment number 18.

    Sustainability is usually associated with finite resources and human survival, but in social terms I draw attention to the sustainability of our social order, if that order is usurped by principles that actively undermine trust, then it is not sustainable - and will draw forth the conditions that necessitate reevaluation at an appropriate level. Fraudsters know that one can make a short term profit by abusing trust - but then they have to live outside the law of their heart, for they squander the capacity to grow trust within their own lives. The principles that are undermined or sacrificed in the reductionist and materialist 'perspective' of the modern market driven mind are principles that relate to the heart or soul of man. Soul-less existence is slavery to mechanism. And the attempt to mechanically manipulate life or living systems is to become both blind and insane relative to the actual living interrelatedness that is the embodiment of our living.
    The church of the market-driven is effectively usurping governments - is it not?
    This already has - and will continue to have - catastrophic results. In terms of the effect on our own life, on our social and cultural lives, on the world at large.
    This is beginning to dawn on us; what we are doing doesn't work.
    Breakdown of trust and erosion of structures of trust will accelerate a willingness to reevaluate on a far more radical basis than clever thinking can present.
    We - all of us - who have the awareness of responsibility toward Life, need to grow a culture of responsibility to the Whole. To actively embody honesty, trust and relational responsibility - and disinvest in the masks and charades of a secretive and manipulative private self interest. The Law is not man made but humanly we are to discern from the nature of wholeness, that which serves to unify and hold us in Life - as part of Life.
    Because our 'minds' are programmed to think along socially trained lines - does not mean that that the basis of such thought is either sound or sane. The need to bring forth shared values is all the greater as our human perceptions reflect a bankruptcy of spirit, thought and of our commonwealth of resources.
    The evils of which humanity has always been in part aware, now have global reach and we may seem powerless. But that is because we ‘give’ our power to that which is defined powerful and suck on it for sustenance.
    We may do so in blind trust or fearful hope that protecting our private self interest is our survival. But at a certain point such survival is too dispiriting to bear and the rationalisations and mythologies that support such a lifeless life wear thin and break down. If renewal is desired truly then it is already at work. It is simply a matter of aligning with a freshly revealed foundation instead of the fixity of thought based derivatives. As a way of being and not as some kind of fix. As a rediscovery of the true inheritance that remains Life - whether we share in it or not.

  • Comment number 19.

    "Is entente possible between governor and banks"? is the title of Robert Peston's blog.

    Well, if we don't have a champion of the people at the Bank of England ...?

    We are all victims of the global banking crisis and tax-payer bail-outs Pension funds collapsing all around or failing us after 25yrs of paying in. Financial products failing to meet basic contract law when they 'vanish'.

    No return on cash savings - yet, disproportionately highest lending rates, ever.

    If the banking/financial 'fraternity' want trust or respect back - then they have to earn it - in the right way, just like the rest of us.

    However, I can't see how they are incentivised to care about either ethics in their parallel (fingers in ears, and chewing on our pockets) universe? They don't trust each other - so why should consumers of their products trust them?

  • Comment number 20.

    Interesting comments from Mr King but is he aware that e.g. the near state owned RBS is now paying among the highest base salaries to those joining from other banks? These other non state supported banks are thus losing staff or having to increase pay to retain. Many of my own team have been syphoned off to RBS over the past couple of years. They seem to be hiring a lot of people. Perhaps it is worth Mervyn asking the RBS CEO about this.

  • Comment number 21.

    "the guarantee to big banks that they'll always be bailed out by taxpayers has to be removed - as a necessary but not sufficient condition for making the financial system stable, robust and socially useful." This must mean removing the guarantee for peoples' savings and telling them the risks involved but at the same time providing 100% safe alternatives through maintaining a substantial degree of public ownership and even this government is starting from a strong position of public ownership. However even though Lehmans were allowed to go to the wall the resulting panic effectively ensured the banks were too big to fail so another essential element must be a Glass - Steagall style act. Finally the banks need supervision not regulation - intervention 'in between meals' (c.f. Heseltine).

  • Comment number 22.

    Shame Mr King did not realise all this before the bust. If only he had heeded the words of Vince Cable et al. Now he has to tackle people who earn more in a month than most of us do in a lifetime - we can afford diamonds and, in any case, most people can't tell them from paste...

  • Comment number 23.

    The only country thus far to charge any of the banksters for their crimes is Iceland. The principle of private profits but public losses that we in the UK seem to blithely accept is not just letting the banksters off the hook, it is setting the precedent that the crooks will never be held accountable and what they did was ok, the perfect situation for the same, or similar mistakes/crimes to happen again. I'm now convinced that my decision in 2008 to move my savings out of paper "money" , and invest in physical money, i.e. gold and silver (not etf, physical metals) was the right decision at the right time.

    Massively rising commodity prices, a falling US dollar, food price and unemployment driving revolutionary fever and demonstrations in the middle east, north africa, and the other places that the bbc and mainstream media fail to mention in any detail, (wisconsin, greece, turkey, ireland, and who knows where next ), the future doesn't look too rosy.

    And we are STILL debating the rights and wrongs of the banking frauds? If we still had any manufacturing sector, we could at least build guillotines, but how do you do that in a "service" economy?

  • Comment number 24.

    Great to hear someone with influence talking straight about the situation that politicians and bankers allowed to develop. Capitalism can probably work but only if the system has sufficient regulation, and penalties for failure. There is no equity currently. Those in the financial world are able to earn excessive reward for manipulating the levers of finance whilst many of those actually doing the work to service society are paid relatively poorly. Then when the bankers screw up, who pays but the lower earners, in both salary and jobs, whilst most of the bankers carry on regardless. The system is broken and needs fixing. Politicians have been weak - many are part of the elite that have benefited themselves and failed the wider public. Well done Mr King. Let's hear more sense and see more action.

  • Comment number 25.

    I suspect that Mervyn King is waiting for the government to put the necessary law and controls in place which will bring the banks to heel but the government is either not willing or not able to do that or is dragging its feet.

    If the banks are trading exactly as they were before then another credit crunch is on the cards in the near future with all the negative consequences which that brings.

    The failure of the government to seriously regulate the banks means that the banking system is simply operating without brakes and places our ability to pay off the deficit at risk.

  • Comment number 26.

    There was a time when there were many more clearing banks in the UK each of which had managed to grow to institutional size without speculation, were run cautiously, knew their customers by name, knew their customers businesses and served the community and a period of stability was experienced. The government of the day then permitted these staid reliable 'friends' to merge amongst each other on the premise that as the country became more 'banked' there would be major economies of scale. The result was a loss of banking competivity and the few remaining now much bigger institutions found themselves increasingly in a monopolistic position in relation to their increasing number of customers. The 1970s saw the UK's economic strength decline overall and high levels of inflation and taxation drove more people and businesses to seek bank support. In this situation there was a sea change in the view of all institutions towards the markets they served and they no longer viewed their roles in society as supportive but rather that of being obligated to maximize profitability with deregulation providing greater freedoms to pursue this gaol. The great economies of scale promised earlier at the time of banking mergers were ultimately retained by the banking industry which then set about compounding the situation by acquiring 'investment banking' operations by effectively taking over what used to be termed Merchant Banks. Merchant Banking metamorphosized into investment banking and speculative trading activities were added to the new structure. The banks now bigger than ever had become completely impersonal and due to the demands placed on them by an ever more distant customer base had become too big to ever be allowed to fail.
    Exactly as the Governor comments in his article published to-day there is no reason why a profit motivated entity, especially one in a near monopolistic position of power, should not expect to take it's own losses (or pay it's own costs in dealing with customers ) and be allowed to fail when it is effectively bankrupt. If taxpayers are obliged to guarantee the survival of badly run banking operations then banking is no longer a commercial business in the accepted sense of the word, it is in fact nothing more than a function of the State so this then begs the question as to whether banking should not be organised along entirely different lines with day to day banking needs being offered at economic levels of cost. Naturally the banks will howl at this suggestion but if their existance has to be guaranteed by the taxpayer it makes little sense for them to charge whatever they want.
    The above comments are not intended to suggest or imply nationalisation or decommercialisation of the banking industry but rather to engender some thought. After all, if the Chairman of a leading UK bank thinks it' s no longer neccessary for banks to apologise for the carnage they have created and if banks think there is nothing wrong in paying out grotesque bonuses before the taxpayer has been fully reimboursed for saving their necks then much more thought is required.
    JAmendall

  • Comment number 27.

    Wanna separate the wheat from the chaff? Abolish the deposit guarantee scheme. Twin benefit, the bank party stops and consumer spending (not to mention house buying) goes through the roof.

    Sorted.

  • Comment number 28.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 29.

    Banks put profit before people - no really?

  • Comment number 30.

    If there's one thing we've all (outside of bankers) have learnt is that Mervyn King doesn't understand what investment banks do for the very good reason that the banks themselves are almost no idea.

    For the same morons who managed to drive us over the cliff in the first place to criticise someone who demands better driving from them just demonstrates what a huge mistake it was to bail them out in the first place. These guys SHOULD have been put out of business and thrown on the dole as a warning to the next generation of bankers who took their place.

    Instead we have the same people - proven incompetent by their own actions beyond any doubt - in the same jobs in the same banks demanding to be allowed to make the same stupid mistakes all over again.

    It's not too late for the government to pull the rug out from under them and, in the case of a few like Barclays*, I think it would do us all a lot of good if they did so.

    *Barclays' customers would be well served by an announcement that they will not receive any payouts in the future if they hit trouble. They're riding high and openly on the belief that they can never fail. That attitude needs a bucket of cold water on it asap.

  • Comment number 31.

    The government & the banks feed us mis-truths, like the Iraq war - founded on lies and hypocrisy. For some reason the British people accept it and the guilt move on to make money elsewhere.

    I cannot understand why the people voted a party into power which has sustained our standard of living with massive borrowing - all of you who voted Labour are guilty of saddling this country with enormous debt, and I can only hope the current government is strong enough to start resolving the problem.

    You reap what you sow.

  • Comment number 32.

    Robert

    Yes, in ideal world, there would be mutual respect between banks and the Governor of the BoE, but the fact that there clearly is not is down to the actions of the banks. They can remedy the situation by facing up to the reality that they are disliked and mistrusted by their customers.

    Bank customers now feel that their bank simply sees them as a profit source, with no other relationship, and certainly nothing by the way of mutual trust and respect. That can only change by change in the banks.

    What would help is further competition, but not simply the creation of more PLC financial "service" (sic) providers.

    A useful approach would be to break up both the Lloyds and RBS behemoths. The Halifax Building Society could be recreated from out of the former. Even more revolutionary might be to cut NatWest out of the RBS group, and for the Government to sell it to its workers i.e. to create a John Lewis organisation of real size in the financial sector.

  • Comment number 33.

    This is not 'fresh air' for the banks.... it's an 'arctic blast'. Let us hope that this King does not suffer the fate of Charles I.

  • Comment number 34.

    somebody should let Mr King know that not only has the horse bolted, it made it's way over to France where it was turned into stew. In addition, the stables where the horse lived has turned into a crack den. Thanks Mervyn, thanks a lot for everything you did.

  • Comment number 35.

    Mr King is spot on. Those with longer memories will remember the days when we had a large number of "banks" who cared about their customers, big and small, they were called mutual building societies which, as well as providing a generally good service to their own customers, exercised a moderating influence on the market as a whole.
    Most were privatised during 1980's. Their members made money from selling their newly acquired shares and the City gained control of the institutions. What we have now are exactly the institutions as described by Mr King who care nothing about their customers and are interested in the fast buck.
    They see nothing wrong with lending to charlatans, in the knowledge they will be bailed out if things go badly wrong, and they see nothing wrong with enticing an honest customer through the door with an attractive interest rate and quickly dropping that rate while the customer is too busy to be looking, all in the name of maximising profits. There is nothing inherently wrong with maximising profits but as Mr King points out other businesses do this while maintaining healthy relationships with their customers; there is a mutual trust which I would submit is not present with today's banks.
    We must get back to the days when that trust existed with the banks.
    Can anyone imagine the boring old mutual Halifax being in the mess that the new Halifax managed to get itself into, which prior to the government bail out, was owned by the so-called whizz kids who manage money for City institutions?

  • Comment number 36.

    When the bankers make loads more money than the businesses, entrepreneurs and guys on the street they provide banking services for, something is wrong.

    The way the banks entice deposits off you with favourable interest rates, and then almost immediately downgrade that account to one bearing minimal interest without telling you, is absolutely appalling and downright fraudulent.

    OK, from time to time the banks send out a schedule of the interest various accounts are paying, but I can never find the name of my account on those schedules.

    The banks have become too powerful, with an ineffectual regulator and immunity from failure. Worse still the managers in charge are so thick and/or arrogant they are unable to recognise their failings.

    The system needs a thorough shake up.

  • Comment number 37.

    In the 19th century, the Law of the UK on bank deposits was set. The Law Lords ruled that money paid into a demand deposit was a loan. This ruling has been applied all over the world. But when I put money into a demand deposit, I still own that money; the bank doesn't, but it puts the amount I have deposited into the assets of the bank. It now seems to have two owners and we are both counting that sum of money as an asset. This is totally contradictory. However, the ruling made the depositor a creditor of the bank. If I have not loaned the money to the bank explicitly, I have not transferred the money's ownership. This ruling seems perverse and wrong.

    Banks can still use money attracted into loan deposits as they now have control of that money and the depositor is a creditor of the bank. He is paid interest, in part for the risk that is being taken by him in his change of status. As depositors, we could assess the risk of depositing our money in any particular bank.

    Mervyn King could do much to stabilise the system by insisting that the Government pass a law that reverses this judgement. The government should be pressed to recognise that this judgement was illogical and wrong. It is one of the reasons why the banking system is no longer fit for purpose.

    Mr Cameron wants to lead. So why does he not develop a policy that will reverse this law?

    No doubt the banks will kick and scream. This law is clearly wrong and brings the law into disrepute. Mr King, please press for a change in the law. It is the right and moral thing to do to correct an idiocy that has, I believe, lasted since 1811, 200 years.

  • Comment number 38.

    What Mr King is doing is shaming the banks in public, and shaming them as a high profile public figure, and one who can bring his influence to bear. Hence I suspect the unprintable comments by some bank board members.

    They can ignore comments by others in a cavalier fashion based upon their sense of self importance, and the dross, that is the rest of us, can pay if their games of momopoly go seriously wrong.

    In a world that has a dearth of positive role models, the bankers represent one of the most negative. In contrast if one looks at the comments of King, to the more positive image of medium size companies who appear tto apply a duty of care to employees and customers.

    Carry on Mr King, please don't shut up, you pleak for the majority of us.

  • Comment number 39.

    Well whether Mr King will do any good commenting as he has is not really open to question. Looking at how the government has acted recently ( like slack jawed daffodils) towards the bank bonus issue I am pretty certain nothing will change. Like all comments and statements it all evaporates into the atmosphere like the hot air that it is. It may be said with good intention, but there seems to be a lack of will or guts to change anything. If talking solved the worlds problems, it would have happened centuries ago. In that context the world is running perfectly. We obviously want it this way or it would be different.

    I read a comment to a previous article in that the Tories are considered the political wing of the banks. I'm sure the Tories would deny that, but their actions do not. Both my grandfathers who fought for England's survival in WWII would be spinning in their graves now, wondering what it was all for. To allow a very small privileged class to continue with their snouts in the trough and their pudgy little hands on most of the country's cash. If I had the means and the skills wanted I would emigrate today. As I don't I will just get trampled and kicked every day as the greedy pass by to go to their clubs to laugh at us and think how to placate us with more platitudes about how vital it is for us to tighten our belts. Roll on the 'Big Society' so we can do most of the social service jobs for nothing!

    Have a nice day :)

  • Comment number 40.

    Recommend posts:
    07 @ 11:37am on 05 March 2011 - 'stanblogger'.
    11 @ 11:40am on 05 March 2011 - 'juliet50'
    26 @ 12:41pm on 05 March 2011 - 'Michael Phillips'

    It's also overdue for Mervyn King to speak his mind and stand up for all of us who, without our income, in all it's forms, banks would collapse - not the other way round, as banks would like us to have us believe.

  • Comment number 41.

    Actions not words please

  • Comment number 42.

    Thank you, Mr King! The politicians seem hobbled, the bankers are totally self interested. There is an unvoiced fury by us restrained Brits, at what is unfolding as a result of bankers lack of integrity!

  • Comment number 43.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 44.

    "if it's possible to make money out of gullible or unsuspecting customers "

    We have all heard case after case where the financial institutions have obtained millions of pounds from mis selling all sorts of financial packages to jo average , but this pales into insignificance compared to mis selling to businesses themselves.

    There is only ONE solution split the banks. Retail banks will therefore have to forcus on the customer to SURVIVE . Merchant banks will have to pay the going rate for (That includes risk element) money to speculate on.

    The banks will claim all sorts of doomsday scenario's but until this is done the UK taxpayer is in the front line for another financial meltdown.

    Tougher regulation will fail , just like it did last time. Gambling banks have to be allowed to fail and the sooner the government can confirm this position the better.

  • Comment number 45.

    In the context of the Banking fiasco should we be worried about the sensitivities of the poor bankers. If his comments are correct, and I believe they are, it shows the first sign that proper regulation may be on the way. And their bluff over the bonus issue should be called- they need us as much as we need them in a properly regulated system.

  • Comment number 46.

    Give the banks the rules they want............... just introduce one caveat. ............... when they fail, any director both current and past is charged with high treason against the state, has all assets sequestrated and serves a minimum of 20 years.

    Deterrent against reckless and irrespionsible behaviour is the only way.

    Then, its over to the banks..............

    We hear all the threats about these guys taking their ball home, well lets play their game. If they want to leave these shores let them................ we cant afford to lose the talent they say, excuse me, talent for what ? There are 3 million unemployed, am sure we can find replacements amongst that lot.

  • Comment number 47.

    Mr King has been reading these blogs. He's repeating what we've been saying for ages.
    Some years ago (30 or so) the banks took over/set up insurance departments and employed salesmen.
    One of them said to me "It's like falling off a log. I just say I'm from the bank and the customers trust me." Driven by commission the attitude to customers changed - they became just prospects.

    Borrowers became more important than depositors. Hence Northern Rock.

    It is not just the high bonus earners that are the problem, it's the bonus culture throughout the banking system which has led to risk taking and viewing the customer as simply a commodity and individual customers as something you can con into paying for sometimes good services/products. It's no wonder that they have suffered from customer disloyalty.

    Banks have for too long viewed the customer base as a necessary evil. They would much prefer to deal on the money markets and take risks with investment vehicles, especially if they take the profit and can pass on the loss to someone else.

  • Comment number 48.

    All power to Mervyn King, I have a small business with a full and growing order book despite being with my bank for over 25 years and never "misbehaving" the support given throughout these harsh times has been absolutely nil. The banks are like a monster out of control who if left unchallenged will cause another economic meltdown much much more profound than 2008, they caused it joe public are asked to pay for it. Bonus payments now being made are absolutely obscene it seems in UK 2012 total failure is rewarded.

  • Comment number 49.

    "They would argue that this project isn't helped when they are vilified by arguably the most important figure in their lives."

    I love this idea that we should stop the banker bashing. You can see them all sat sobbing in their million pound houses, as they read another article damning their irresponsible behavior.

    "Stop it. Or we'll take our business elsewhere" they cry. Let them go I say.

    An economy relying so heavily on the financial sector for growth obviously doesn't work. Let the banks go elsewhere and force the government to re-invest in the manufacturing sector, that provided us with stability for so many years.

  • Comment number 50.

    Preston says that the head of the bank of England should not be too chummy with the banks. This is also true of the business editor of the BBC who should not be too chummy with the banks and more willing to be a true journalist in uncovering the devastatingly immoral actions of the banks that have led to such an abuse of the financial system to the detriment of the British public.

    Preston also says that Mr King has little respect for the banks. I believe that Preston has little respect for the common man and woman in this country and if he really wanted to serve us as a guardian of our democracy (the true role of any high profile journalist) then he should begin to state the shameful behaviour of the banks correctly, ie as wrong. He should point out what so many of us little people want, true reform of the banks. That is when we haven't been indoctrinated by the repetitive remarks of people like Preston that only protect the banks from the true criticism they deserve.

  • Comment number 51.

    From post 31;

    "I cannot understand why the people voted a party into power which has sustained our standard of living with massive borrowing - all of you who voted Labour are guilty of saddling this country with enormous debt, and I can only hope the current government is strong enough to start resolving the problem."

    I can confidently state that it would have made no difference who got elected and re-elected after 1997.
    This appies to policy on finance and war.
    They are taking bad advice from vested interests.
    Politicians wre put on a Neo-Liberal (or Neo-Con as both are the exercise of absolute power) course but they are very slowly realising that the old adage "the borrower is servant to the lender" means litle democracy and debt-slavery for the people.
    Beware of rule by dynastic milionaires and their trickle-down crumbs from the cake-laden tables.
    Mervyn King is getting on and will be moving on then passing on so he wants to get on the right side of history and look like a good guy.
    He heads the nationalised B of E, whereas David Cameron heads the privatised government.
    Who represents the people?
    I wouldn't be surprised if, after retiring, Sir Mervyn calls for a nationalised credit system.
    Any sensible person came to that conclusion years ago.
    The money system is the keystone of high, ovearching capitalism that has to come down first before anything can be re-built.
    As a start, do not allow the credit-creating facility (it's part of one system) of RBS and LLoyds/TSB to go back into the private sector.
    We must show the banks that we take the responibility as lenders of last resort as long as we have ownership of the money SYSTEM for the benefit of all.

  • Comment number 52.

    Where's Faker Jacques when I need him? There is a fighting chance I might have agreed with one or more of his posts on this particular Blog ...

  • Comment number 53.

    40


    You are bang on. No customers=No banks. Its simple economics, but apparently beyond the ken of most bankers. They will also be part of any economic chaos they create, however protected the bankers might feel behind their bonuses. But again this just highlights their short term thinking with regard to profits and to h..l with the customers.

    Bankers and politicians very often seem to display the same mentality when it comes to other peoples money. Both groups are willing to take risks with the money, often showing scant regard for the customers/electorate, and it is the tax-payer who ends up with the bill . And as birds of a feather tend to flock together, might explain any real reluctance to regulate the banks. Indeed there are numerous examples of politician today and banker tomorrow. Didn't a recent PM get a consultancy position with a certain investment bank?

  • Comment number 54.

    Robert - Mervyn's comparisons between financial services and casinos is nothing new. Keynes made the comparison very pointedly in chapter 12 of 'The General Theory'. Galbraith made the comparison on a number of occasions.

    The only point I'd dispute is that of a 'zero sum game'. Finance is not a zero-sum game. The ability of the banks to create money, and the role of credit in a boom ensures that financial services, and the people who do the trading, can profit hugely at the expense of the productive sector of the economy, and grab a disproportionate share of its fruits for themselves.

    If the banking and financial services sector doesn't like the truth. that is tough. They are a cancer in our society which needs to be excised. We need a completely new model for finance and investment!

  • Comment number 55.

    King does not "vilify" the banks - Mr Peston, please check the meaning of the word - Oxford dictionary says "defame, traduce, speak evil of". King is too much of a gent to do that. He strongly "criticises" them. And quite rightly. It is good to have someone in the Establishment sticking up for the ordinary current account holder, the family burdened by a mortgage, the victim of excessive bank charges, and the customer being pressured to sign up for a meaningless, expensive "product". I hope the government leave King alone.

  • Comment number 56.

    Mervyn King is knows and preaches too much, but teaches and says too little in honesty. In essence, he is an intellectual hypocrite. The real problem: the current state of Western Monetary Economics is bedevilled by the un-coordinated actions of the hypocritical practitioners from both private and public sectors.

    The BoE relationship with the Banks is really a step lower than that of a product manufacturer in an economy. The banks are really franchises in the country’s money creation process. A franchise has to adhere to the dictates of the franchisor. Macdonald’s has its way of making hamburgers and making profits, and all its franchisees comply.

    Similarly, if the Government through BoE is the franchisor then its banks as franchisees should be made accountable in adherence to rules of running the franchise. I’ll not waste time explaining too much why banks are really franchisees, but suffice to say that the exclusivities they enjoy makes them so. This is where the conundrum begins as banks are regulated to an extent that their profitability is ensured in normal times, but when banks venture into new areas for profits, they are given too much leeway for the sake of entrepreneurial adventurism. A McDonalds’ franchisee is not allowed even to sell titbits outside those sanctioned by the franchisor. No latitude for entrepreneurship. Franchisees must refer back to head-office and make the proposal.

    If anyone thinks that financial innovations are product-like innovations, they should think again. When a product manufacturer puts out a product, it can sell well only if the risks to the buyer are reduced and the product’s discernible benefits can be enjoyed. How can a banks’ investment products which are hyped by clever marketing coupled with legal protection for the bank-sellers be considered genuine products’ capable of providing utility?

    BoE’s King talks like a supercilious diplomat when there are already a ‘war’ on to control the banks. We only need to look at the Japanese Banking System after their property bubble to understand why banks are really nothing but franchisees in the country’s credit creation process. There is no further reason to placate them, only control them.

  • Comment number 57.

    I totally agree with Mervyn King here... ...yet I do not believe a word he says. It's been a pattern over the last few years. King says something that everyone with a brain, who is not a banker, agrees with and then acts in the opposite way. Telling (part of) the truth about the banks but then voting for zero interest rates is like volunteering in the fire brigade and being an arsonist at the same time.

  • Comment number 58.

    I do not know anyone who trusts Banks or Bankers; indeed everyone I talk to believes that Bankers (the top ones - not the staff) are thieves and fraudsters. Furthermore, the only reason that the big banks were not allowed to go Bankrupt appears to be that the politicians had been bought. Don't tell me that there was no way the Government could not have taken over the legitimate areas of the banks and let the fraudulent "casino" elements and their black holes (and bonuses) go to the wall.
    There seems to have been no punishment of the wrongdoers or justice for the people. Quelle surprise! Bankers need to be aware that inevitably, somewhere down the line, there will be reprisals. Although I, personally, would never condone the guillotine of Bankers, imagine the position of a person who, through the actions of greedy bankers, had lost family, job, home and all hope and future. As one of your readers rightly said: "You reap what you sow". It seems to me that these big bonus bankers will not be reaping peace of mind for themselves or their families - rich may be a goal but living in fear for yourself and your family for the rest of your life may not be worth it.

  • Comment number 59.

    Maybe Mr Robert Peston, it is time that you considered the possibility that you've got it wrong ...and further that Mr King is the one that's assessed the situation accurately.

  • Comment number 60.

    If bankers are deserving of exceptional rewards they should also be liable for exceptional punishments. This is how it would work. You pay them a market rate for doing their jobs. If they do exceptionally well they get their bonuses. If they do exceptionally badly they get exceptional fines which must come out of their personal capital. The issue is that they are gambling with our money. If they do well there is a personal reward, if they do badly at present they can still walk away with all their ill gotten gains.

  • Comment number 61.

    Robert, there is no entente possible between the governor (Mervyn King) and the banks. The banks have become reckless, ruthless, macro-economic clueless exploitation machines, used by a small financial oligarchy and their beneficiaries to enrich themselves and to empoverish the nation and the average tax payer. The average reader may not believe this, but please read through the linked articles and the extensive research which can be found at the following web address:
    http://globalinsights.wordpress.com/

    Banks need to be strictly controlled and reined in, otherwise some very greedy individuals will always abuse their power of controlling access to vast sums of finance.

  • Comment number 62.

    "Banks are trying to maximise short-term profit at the expense of customers, the Bank of England governor has said."

    Thank you for stating the obvious, Mr King. Isn't that the aim of any multinational bsuiness? Businesses have to provide some level of customer service or they'll have no customers and die. But I can't think of any profitable multinational corporation that is philanthropic enough to put customers first.

  • Comment number 63.

    All hail the King!

  • Comment number 64.

    Mr King is so right! Its nice to read him stand up and be counted and with an inside knowledge he has put it down in a way we understand and summed up how we feel.
    The banks dont care two hoots about their customers and they do have a cavalier attitude towards them.
    Last wekk my mother wrote to her bank to ask why the country village bank was only open 3 days a week (only two if its a bank holiday) and if they could go back to 4 days a week. The bank manager said no everyone was happy with 3 and there wasnt enough business to open longer. Mum replied that she often cannot get in to the bank because of the queues. As a business customer time is money and she has been having to waste time waiting only to find it closes, leaving a queue still. He then replied she was the only person complaining and that there were no queues long enough to warrent longer opening hours. She was free to take her business elsewhere. Incensed by this mum is looking round for another bank but as the area manager is aware that village bank is the only one in a 15 mile radius and the rest are all in towns.
    Mr King needs not to rely on the government to sort the mess out, and frankly the Osbourne deal means nothing, its just empty rhetoric, the banks will just carry on the way they want to. The building societies are not much better. The direct debit guarentee is a fudged up lie and the banking clearing times is nothing short of nationalised legal money laundering. If it all comes crashing down, maybe thats a good thing and anyone foolish enough to use a bank account as a savings account really should rethink their own ethics.

  • Comment number 65.

    A brave speech, I don't know if it'll make any difference. The country and the government seem to be owned by the banks and apparently having ‘done us over’ once they now intent to ruin us completely; not to mention the future of our children and grandchildren. It may be too late already.

    One day there is going to be a great reckoning and if I were a banker (or one of their puppet masters) – or had assisted said felons – I would make a hasty escape whilst the going was good.

    I had thought Mervyn King's head belonged on a metaphorical pike alongside all the others ... but I shall reserve judgement to see whether he can offer more than one or two pretty speeches.

  • Comment number 66.

    58


    This popular perception of those at the top of the banking industry was endorsed by comments by one of their own, that most of them don't do anything that is socially useful . But though this may well be true, it has to be seen in the context of power.
    And the banks have been given the freedom to become powerful, and powerful through leverage.

    But yes, if too many are put into poverty, and attribute that povert to a particular group, then the results could be quite ugly. Nazi Germany is perhaps a graphic reminder of how hatred can be harnassed and focused.

    The electorate today is much more sophisticated than in the past, and though duped occasionally, is much more able to see through rank hypocrisy and political gabble. Something that should give our highly educated leaders reason to pause and think, because an educated electorate is not prepared to be treated like uneducated serfs.

  • Comment number 67.

    Later this year it will be four years since the run on Northern Rock.
    Much has been spouted & written, but very very little has changed.

    Why do you suppose that is?

  • Comment number 68.

    That's it Mervyn...stick it to them! ...As was once said of (I think) the French... 'They don't like it up 'em'.

  • Comment number 69.

    Any self-serving 'nose in the trough' 'fat-cat' banking type, who suggests that the governor ought to resign, should be taken out and shot!

  • Comment number 70.

    > His view of what they do and how they do it is a universe away
    > from their own self-image.

    Nonsense - his view is that of the public. It is the bankers who are crackers - we all knew that.

  • Comment number 71.

    Is entente impossible between governor and banks?
    Highly likely.
    The gap is, as you have said, "unimaginable" in size.
    What these mega banks do is indeed a universe away from the manner in which the rest of us average folk even think.
    I agree so much with Mr. King that some manufactureres "care deeply about their workforce, about their customers and, above all, are proud of their products".
    But with mega banks its all about profit, the bottom line, acquisitions, nefarious financial products...greed, greed and endless greed. It's a sickness - a devouring sickness that prevents the banks from every having sufficient.
    There is no sense of long-term relationship with mega financial institutions because the philosophy is: "Here today, and gone tomorrow; if you don't turn a profit for us, there's the door and don't look back!
    In mega babks
    - customers are suckers, one born about every second
    - monies cistomers are friends WHEN MONIED only until the mega-bank takes your money from you.
    Let's face it head on: financial institutions are entities, things, they are little more than their electronic platforms - they do not feel: They exist to produce profit.
    This attitude is a great loss to society, but it is society that must come up with the alternative because the mega banks certainly won't!
    a) Either split these mega banks into retail and investment, or create entirely new retail banks that will have no parrt of investment.
    b) On all banks involved with investment, impose a financial activities tax so no nefarious financial product whizzing through an electronic platform can excape audit and examination for suspicion and probably illegality.
    Of course banks to big to fail, tied up in investments, are casinos. What else would you suspect? But when they bet with your money, you should be going in eyes wide open; you take the gamble; you accept the risk. Don't cry when the dice come up snake eyes.
    There should be no trust between customer and casino. Do you believe any casino exists to make its customers rich? It will happen once in a while - but not often...odds about 1 in 1,000,000.
    Retail banks, on the other hand do not engage in investment. They exist to assist their little communities. It's win-win. Your borrow; mostly you succeed, and the retail bank makes its percentage of profit - no derivatives, no credit default swaps, no loading platforms.
    King is looking to the Banking Commission to come up with the requisite reforms - still?
    When?
    Part of the problem is that political business suits run around like frightened chickens when it comes to banking reform - Let us make this perfectly clear: NOTHING HAPPENS when politicians take on banking reform. Who do you think finances political campaigns?
    Therefore create retail banks, and give the people choice
    a) casino, or
    b) real community bank bank.
    Don't you worry about "casino" banks; they know exactly what they are doing and how to do it. When was the last time a "casino" bank created a financial instrument that was
    1. understandable by the average human
    2. designed to make a profit for the average human, or at least give the average human a fair fighting chance
    3. assisted the economy of any country?
    Yep, the investment banks in general are behaving in dangerous ways; the new Prudential Regulation Authority, which is supposed to monitor whether individual banks are taking excessive risks, I doubt will be able to keep apace with the most ingenuious commerce grads that get pumped out of the most prestigious schools - hot off the press - straight into the largest investment banks too big to fail.
    Some of the things I'd like to say about investment baks are, like Mr. King, unprintable.
    However, my last statement on this matter, no country - not even you extremely proud Brits - can afford to take on the best of the best of these investment banks ALONE. You must integrate your efforts with the EU. You should be sending your best financial minds to run chief financial portfolios at the EU. Division is a cleft that is easy to break. You are either rock solid with the EU, or you will be targetted.

  • Comment number 72.

    I happened to watch 'The International' last evening and thought this quote was particularly telling:

    "You control the debt, you control everything. You find this upsetting, yes? But this is the very essence of the banking industry, to make us all, whether we be nations or individuals, slaves to debt."

  • Comment number 73.

    Robert, you ask "Is entente possible between the governor and the banks?

    ++++++++++++++++++++

    Who cares? Merv the Swerve is the Governor of the BoE.

    When he says 'Jump!' the banks should Jump and not question the order as an American serviceman would by asking 'How High?'

    He has the authority and I want to see him use it.

  • Comment number 74.

    There are two overiding prerequisits for a stable and successful society in the UK going forward into the medium and long term, energy and food (including water) supplies that are both sustainable and ecologically sound. Given this we need several things to now adapt and evolve to service this need. Firstly (and these are in no hierachical order) we need a strong educational sector to develop the skills to sustain the industrial and agicultural infrastructure that will deliver the above.Also we need a financial system that allows for the stable and predictable investments in these infrastructures without the pernicious instability of the present system.Thirdly we need a political system that is not dedicated to the needs of a narrow slice of society and recogonises the need to cater for the wellbeing of the masses and does not default at every opportunity to creating underclasses and the dispossessed.If all these things can be brought together we may escape the kind of instability that we see right now in the Middle East/North Africa. If not it is inevitable that we will face the same (if not greater) discontent. In a world of finite resources even the most economically powerful nations will be disrupted if they fail to meet these challenges and the finacial sysetem as it is at present is the most likely cause of failure as it continues to divert resources,attention and action away from where it is really required. The solution is to change the financial system to something more adapted to the worlds needs over the longer term and to do it now so that the decks are clear for the long and difficult road ahead. Population growth is now producing the kind of global societal pressures that could end in disaster if we do not rise to the challenge of remodelling the way we all live. We owe it to our children's children to give it our best shot.

  • Comment number 75.

    What with Murdoch, the bankers and hidden others manipulating the leadership of our feeble 3 man parties I don’t see any way we can prevent the good ship Britannia crashing spectacularly on the rocks. Presumably the wreckers will then try to make off with anything portable and move on to other victims abroad.

    Surely the solution isn’t going to be Cameron, Clegg or Milliband? It’s through the likes of them that got us here in the first place.

  • Comment number 76.

    It is good to have Mr King back on an even keel. His comments on looking after the people at all levels of an organisation or community is important to a healthy life in our society. Wise comments need to be made and do lead to upsetting those who have a more selfish ambition and a narrow point of view. The bigger this group of people is, the bigger the problem is. Hence, the latest bank collapse and recession. A more humble approach by the banks and financiers would be appreciated.

  • Comment number 77.

    If Mervyn King had done his job PROPERLY the banks would not have destroyed the country. He is just trying to shift the blame which he knows is his.

    (Properly setting appropriate interest rates for the last decade to prevent the bubble economy from booming and so creating the inevitable crash.)

  • Comment number 78.

    As a good BBC man, Robert Peston implies, though does not make it explicit, that "this degree of froideur and mistrust between Mr King and the banks," is a result of misjudgements on both sides and therefore, both sides need to adjust their position. This refusal to discriminate between fallible humanity (Mervyn King) and evil incompetence (the big banks) is part of our problem. There is a moral, as well as a technical, judgement to be given here and the BBC Charter doesn't prevent it being made.

  • Comment number 79.

    #74 globalrep
    "We owe it to our children's children to give it our best shot."

    Plural. And that is the first hurdle.
    Looks like you have fallen.

  • Comment number 80.

    A few billion in bank bonuses does not even register on the £4+ trillion UK national debt although King was right to admit that he should have warned of the excess consumer credit far earlier but would Brown have acted? Constraint on consumers such as the old credit limits and 33% deposit rules, would have helped no end although it would not have stopped Brown overspending on public sector bloat.

    Unfortunately King ruined his speech by adding a purely political statement: "Why do banks in general want to pay bonuses? It's because they live in a 'too big to fail' world in which the state will bail them out on the downside." There is of course no objective connection between bank bonuses and the bailout - bonuses were paid long before the bailout and they were paid in all the large banks not just those who needed help later.

    It is government borrowing that has got out of control across the western world and it is politicians, and their voters, that need controlling not a few minor updates to the bank system. However we now have the EU angling to create a state supported banking system while King has rightly stated that there is no place in a market economy for organisations that are immune to failure. The two views are in clear conflict and as usual the idiot politicians will try and buck the laws of economics and everyone will suffer.

  • Comment number 81.

    Mervyn King is only speaking his mind, and I suspect that most people would agree with him, whether or not they are financial experts.
    The FSA turned out to be the biggest joke is British commercial history.
    "Froideur"?....c'est absolument glacial for most of us.
    There will not be another financial crisis or crash here.....GB will simply go bust and default.....game over for the UK, for its creditors, and for its future.
    And game over for the City.
    The Germans will not bail-out all the wrecked banking economies in the world.
    When we're on our knees begging them the response will be...."entschuldigung....aber NEIN."
    The "Icelandic method" is our only option if the corporates and financials don't reform.
    So how to "rein in" the self-obsessed, self-rewarding "big finance".
    I've said this before....but the UK,public, the European public and the US public are the corporate and financial industries BEST CUSTOMERS.
    So why would many of the biggest corporates be abusing their best customers?
    If our governments co-operate, they will have all the "pin-striped cowboys" by the ....s.
    If these governments do not co-operate, reform is far more difficult....
    Mr King is up against "Gordon Ghecko".
    Mr King may be powerless unless these reforms are right across the West.
    But he still has the power to "print money"....in ever larger, and more worthless, bundles.

  • Comment number 82.

    Was there a point to this blog? I am not sure if you are voicing an opinion or sitting back on that well worn and must be painful by now, picket fence.

    I am more interested in the strategy and timing behind making such an obvious statement. If the subtext is "your time is up and fast approaching". Excellent.

    What I found curious from King's comments was that he was surprised that ordinary folk were not more upset than they might otherwise have been. That worried me, that really worries me.

    If that is so then can I ask you to convey to Mr King that there is a reasonably sized demographic that are seething and will not desist their contempt until sackings and fraudulently gained assets are seized.

    If only for the very good reason that these contemptible gluttonous noxious individuals who live in a world of country clubs, security gated mansions and complementary privileges, a lifestyle far removed from their victims. That they then have the brass gonads, the stupefying temerity to plead "enough bashing please" !!!! Put these suits on the street with a begging bowl.

    Please Mr Peston, when you next meet him, please relate to him that emotions are far from tepid.

  • Comment number 83.

    As banks and current government push down on the majority of people in Britain - who are very bright and savvy about manipulation by both - the people will push back very much harder.

    People will not buy pensions, financial products or only minimal imported stuff. People will focus on paying down their debts (which banks and credit card arms really hate) to achieve financial freedom and therefore personal freedom.

    People will use credit cards for major purchases for protection under the Consumer Credit Act. Wouldn't it be great to pay into your pension monthly with your credit card - then your pension would be protected under those regulations? Strange, isn't it that you can't do that - therefore we are stuck no protection for our pension failures?

    So the moral is that we have a parallel finance industry:

    You have Consumer Protection for buying a television, for example - yet -
    no Consumer Protection for paying into a pension for your whole working life?

  • Comment number 84.

    Really, Mr Peston. Since when do the banking community understand anything but profit? If they were so competent, we would not have had a crisis. It is not just UK banks either. Mr King seems to be saying the right thing. It is high time that the financial industry is put in its place, and if it hurts, that is just too bad!

  • Comment number 85.

    prudeboy wrote:
    #74 globalrep
    "We owe it to our children's children to give it our best shot."

    Plural. And that is the first hurdle.
    Looks like you have fallen.

    **************************************************************
    Acutually not so - both of mine are adopted.

  • Comment number 86.

    Well, try this: there's a posting on Face Book "Beat the Bankers" which is looking for practical ways with which to tether these people such that they serve us rather than milk us dry, so they create industry rather than drive it to the wall and so they support Britain and not endless imports from China.
    Can I post this one? [aot 43]

  • Comment number 87.

    The time for these predatory parasites needs to be over.

  • Comment number 88.

    Whilst i applaud Mr King for coming out and saying what he has , i would give it far more credance if it had been BEFORE we had the meltdown, he was in a position to see and understand what was going on but chose at that time for whatever reason to keep very quiet

    "Those who run the banks go further, and allege that he doesn't understand what they do. Some of the things that board members of banks have said to me about Mr King are unprintable."

    This is the whole problem in a nutshell, if he doesnt understand what they do then it shouldnt be being done...... no ifs ands or buts stopped and now !!!

    Banking should be a clear and simple operation easy to understand and easy to read the balance sheet, as it stands it isnt, that has to change, but i am seeing nothing happening.

    I suspect he is being used to give the impression that the government is possibly going to do something when the fact is we are no further along than 3 years ago and the banks are doing exactly the same things they were doing then.

    Its solutions that are required not more hot air, most of us are now well aware what the problems are it now needs fixed.




  • Comment number 89.

    Why do people come here grumbling about the banks? If you don't like them, don't use them. There are other intermediaries that can handle your salary and provide something akin to savings and current accounts. Whether they can do everything you need you'll have to find out for yourself.

    It's rather silly to expect large multinationals sited among the conduits of the world's economic system to operate on a non-profit basis.

    So thanks, Mr King, for your platitudionous remarks but if you don't like what you've got then 1) you or your predecessors should never have allowed it to start and 2) you are STILL part of the problem, not the solution. Dust off those old regulations from the pre-1985 era, reinstate then enforce them and everything will be fine.

  • Comment number 90.

    RP said:-

    "But whether it is optimal for there to be this degree of froideur and mistrust between Mr King and the banks, well that is by no means obvious."

    Robert, are you getting cold feet?

    This makes it obvious:-

    "Economist Tim Congdon, who was a member of the independent Treasury panel in the 1990s, said he found it "incredible" that Mr King was attacking the structure of the industry he had been involved with for 20 years.

    "We have a very successful industry, it competes internationally, we want it to do well, it employs hundreds of thousands of people, and I find the things that Mr King has been saying extraordinary," he said.

    He added that Mr King, and others, caused the financial crisis "not least because they undermined the ability of British banks to fund themselves in international markets".

    "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 support the banks and to help them."

    There speaks the authentic voice of the culture King is attacking. Note especially the preposterous claim that it was not the banks which caused the banking crisis, but the regulators. "There is nothing wrong with the banks" (or, as it was put by Lloyd Blankfein, CEO of the worst of the lot Goldman Sachs "We are doing God's work").

    There you have it in a nutshell, Robert, in all its overweening hubris, fatuity and boiler-plated complacency. With that attitude there can be no room whatsoever for compromise. It is war and, make no mistake, King is fighting the ordinary citizen's battle.

    The issue is quite simply whether society governs the banks or the banks society. What's the use of kid-gloves when that question is at issue?

  • Comment number 91.

    "83. At 15:08pm on 5th Mar 2011, corum-populo-2010 wrote:
    As banks and current government push down on the majority of people in Britain - who are very bright and savvy about manipulation by both - the people will push back very much harder.

    People will not buy pensions, financial products or only minimal imported stuff. People will focus on paying down their debts (which banks and credit card arms really hate) to achieve financial freedom and therefore personal freedom."

    = = = = = = = =
    Utterly true. There are surely no greater freedoms than being free of debt and the diabolical claws of cosumerisn. If you save or invest, isn't it a nice feeling to know that the bank(s) owe You money... and you can pop in from time to time to complain about the performance of various funds in which you have invested?

    Nice.


  • Comment number 92.

    #80 Paul J Weighell
    I cannot believe the *&&^%$%$£ ignorance of this comment!! This is why we cannot move forward fast enough to avoid future catastrophes.

    The bonuses wont make a scratch on the debt?!. Wowzers! did you figure that out all by yourself?.

    Its &*&^%^%$£" culture!!!

    And why does a government over-borrow? ... well break it down. What did they borrow? Money that's right, and why does it increase? why does the cost of anything go up year by year?

    Or put simply does a bank have control over its value? NO. Since being uncoupled from Gold it has become the plaything of the Stock Exchanges. It is at the mercy of the scum who frequent LSE and NYSE etc

    The only fault of the governments is not regulating banks and investment banks sooner.

    One big face palm in your direction my friend. Employee in the City .. no doubt.

  • Comment number 93.

    It seems to me that with Mervyn King still fearing another banking crisis, the reason he supports the Government's deficit reduction plan is principally because he wants at least the theoretical option of being able to bail them out again rather than with any broader economic merits of George Osborne's plan.

    Same objective as the Government but not quite for the same reasons. Poles apart, in fact, if Osborne stays true to his stated opinion/intent while shadow chancellor. Not quite as political as Labour would make out either.

  • Comment number 94.

    @12. doctor bob wrote:

    "He should simply leave the banks alone, merely checking they're working to regulatory standards, as in the pre-thatcher era when banks had to submit fortnightly, monthly and other reports to the B of E."

    So what comes first, the chicken or the egg?

    As you acknowledge, we're not now in "the pre-thatcher era", and haven't been since - erm, Thatcher.

    So the conditions required for your demand to make any sense don't exist. Ergo your logic is flawed (and that's without going into the politics).

  • Comment number 95.

    #20. At 11:58am on 5th Mar 2011, CityInsider

    "[...] is he aware that e.g. the near state owned RBS is now paying among the highest base salaries to those joining from other banks? These other non state supported banks are thus losing staff or having to increase pay to retain. [...]"

    I've recently worked with RBS GBM (as a freelancer). Having kept a keen interest in it after what I saw there (bloated budgets, very high levels of overstaffing, heavy on office politics and some pretty unprofessional situations) and after having talked to several people still in there or who left the bank, the almost universal consense is that:
    - In the last 3 or 4 years RBS has become a much more political (as in: office politics) and unpleasant place to work. More than once I heard the sentence "This is the worse place I've ever worked in".

    There is a lot of money slushing about in RBS GBM and it's being wasted in adding fat to it, not growing muscle (for example, the group I was in had 50 people while an equivalent team in another bank I worked with needed only 12 for achieving the same).

    If RBS ever was a challenging and professionally rewarding place to work in, it's not anymore - it's slow moving, unchallenging and managed by people who worry more about bureaucratic empire building than about being the best there is.

    So a LOT of people are leaving that bank - it's slowly being drained of the best, brightest and most professional people and all that is left are the meek and the incompetent.

    This is the reason why they are offering high salaries: they have trouble attracting the brightest and the best and even when they manage to do it, they quickly loose them.

    I suggest you keep contact with those of your team that left for RBS - they'll be regreting their move and wanting to leave soon enough.

  • Comment number 96.

    @20. CityInsider wrote:

    Interesting comments from Mr King but is he aware that e.g. the near state owned RBS is now paying among the highest base salaries to those joining from other banks? These other non state supported banks are thus losing staff or having to increase pay to retain. Many of my own team have been syphoned off to RBS over the past couple of years. They seem to be hiring a lot of people. Perhaps it is worth Mervyn asking the RBS CEO about this."

    Do you know (I don't) whether the government has any seats on the RBS board? Or even perhaps a controlling number? Or whether it's represented on the Remuneration Committee?

    I suspect not (what makes me so suspicious, I wonder. I used to be so trusting...).

    If not, that would expose the laughably shambolic way the "nationalisation" (it's no such thing of course) of RBS has been implemented - giving the elected governnment responsibility without power and the Bank's executives power without responsibility ("the prerogative of the harlot..."). Small wonder if that's the case that the shenanigans you describe has ensued.

  • Comment number 97.

    At last somebody in power who wants to tell it like it is. Wonder if King is trying the limits before he becomes the regulatory power for the banks and is in some turmoil over how to square the circle of how he can disconnect the banks from the notion that it would be impossible to let a bank fail taking with it taxpayers deposits.

    That aside I was wondering why I got an email from the CEO of Natwest yesterday telling me what a caring bank they were for their customers and reiterating their customer charter. Wonder if they saw a leaked copy of Mr King's interview?

  • Comment number 98.

    Everybody, including Mervyn King and our host, RP, is entitled to their view of the big, too powerful banks. But I have to think MK is having a senior moment. I don't know what he's doing or why he's doing it.

    There are at least two things he says which are either demonstrably wrong or at least not supported by evidence.

    First, he says manufacturing companies look after their workforce better than banks. I see no evidence for this. If you look at the Sunday TInes list of the top 25 big companies to work for there isn't a manufacturing company amongst them (except possibly a joinery). There's lots of retail (Mothercare, Sytners, Boots Opticians, Nandos, etc), 3 financial services companies (Goldman Sachs is at 2 in the top 25, AmEx and JP Morgan) and two mega accountancy firms. So where is his evidence for such an opinion? Surely somebody as significant in the debate as MK wouldn't just denounce the banks for being bad employers without evidence? Or has he compared big banks to small manufacturers. If so I'm not sure that's a statistically valid comparison.

    The second clearly wrong comment is that bonuses only reflect the too big to fail view banks have of themselves. Banks embraced performance related pay years ago and paid bonuses accordingly - long before they or anybody else thought of size being a problem or with any genuine belief that governments wouldn't let them fail. Lehman's paid bonuses but were allowed to fail. I don't think any bank thought to itself 'we can pay ourselves these big bonuses because the government will bail us out of we mess up'. I think they made mistakes, but in the genuine belief at the time that they weren't making mistakes. And there's no evidence tho think that MK thought they were making mistakes at the time either.

    Vast bonuses may be immoral and the way some are earned may be worse still, but I'd like to think we could appoint somebody who has a reasonable grasp of facts as governor of the BoE.

  • Comment number 99.

    What is clearly happening in modern capitalism is that the big corporates are "playing the field".
    They are "playing off" one country against another, or one tax rate against another, or one national-wage level against another. (Or they are THREATENING to play the field).
    There is no patriotism, and little or no consideration for their "best customers" in the West.
    If the Western bloc "stands as one", re-writes a level playing-field, and TELLS the corporates the terms of trade, they will knuckle under.
    Big business that threatens to "relocate" to "Ping Pong Island" (if they can't do what they want and fill their boots with the nations wealth) where they can pay less taxes and pay less wages, will find themselves at a big disadvantage in trading with the West.
    Customers have always had "clout".
    An new international agreement on capitalist trading and taxes is needed.
    If not, the rich-poor gap will become dangerous and cause serious political instability.

  • Comment number 100.

    #85 globalrep
    "Acutually not so - both of mine are adopted."

    Well done. Keep it up.

 

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