Where am I? 
Home Mortgages Industry Regulation
Bank of England governor Mervyn King said badly managed banks should be left to fold, as he demanded sweeping powers to force financial institutions to be more transparent.
King warned robust reforms were needed to prevent a repeat of the 2007 rescue of Northern Rock, when the Bank was forced to step in, the Times reports.
He told peers and MPs that future banking regulators should have the power to order banks to improve the transparency of their operations, even if they were following the letter of the law.
Appearing before the joint parliamentary committee, he said the credit crunch had seen banks buying and selling financial products that were "riskier than they were led to believe".
He said the rigid, "rules-based" approach of the past had allowed the financial sector to take on huge liabilities, with regulators largely unaware of their activities.
His demands come in response to the government's plan to break up the FSA and turn the Bank into a super regulator. A new subsidiary, the Prudential Regulatory Authority, will be given responsibility for financial stability.
Sir Mervyn said the new authority should be able to tell banks: "Look, frankly, we don't understand why your organisation needs to be so complex. We can't work out what you are doing, so you're going to have to change it. You haven't broken a rule, but too bad, you've got to change it.
"The regulator has to be free to make judgements," he said. "What needs to change in the culture of regulation is to get away from this game in which the regulators write ever more complex regulation and the banks and their lawyers [write] new products which are ... defined in such a way as to not be caught by the latest rules and regulation."
Sir Mervyn said that Britain was finally moving towards a system in which a badly run financial institution could be allowed to fail without endangering the banking system as a whole. "If they screw up, we just let them go, go bust," he said.
He supports the Vickers report recommendations that banks separate their high street and investment operations and hold more capital in case of a crisis.
| Share | |
| Comment | King: Let bad banks go bust |
More regulation news
Email alerts
Recommended reading
Categories
Topics
Comments
Let Bad Banks Fail
Why is it taking so long to do anything meaningful about this. The almost collapse of the whole system took place in 2008. I listened to Bob Diamond on the radio this morning spewing out untruths about how wonderful Barclays are and how they did not have to take any government money to survive. He omitted however to admit that they instead went to the middle east for their rescue money and have benefited hugely from cheap newly printed Q E money etc. Our banks need to be better capitalised, splitting and downsizing. Let them gamble with their shareholder's money and their own but not the publics. Then a system should be set up to adequately compensate and protect the the deposits, savings and pensions of the general public and businesses. They can also get smarter about who they throw money at regardless of the prospects of it ever being repaid, whether in the form of sovereign bonds, mortgages, or credit cards. Why on earth did our banks lend as much money as they have to countries like Greece, Italy, Spain, Portugal and Ireland. The bubbles in all of these countries were highly visible and the bursting of them was inevitable as those of us old enough to have seen this sort of thing, all be it on smaller scales, happen before.
Posted by: John Smyth
Yet more hot air
Yet more meaningless blustering from Sir Merv who will as usual speak all these stong words but do absolutely nothing
Posted by: David John
King: Let banks go bust
"Sir Mervyn said that Britain was finally moving towards a system in which a badly run financial institution could be allowed to fail without endangering the banking system as a whole" - what bullshit ! And, in any case, it's all a bit late to say let the banks fail when they've been given so many billions of tax payers money. And, although it might not make much difference in the great scheme of things, it is totally immoral that those people that caused the crisis are still being awarded bonuses of any kind let alone the obscene amounts we hear about. The government has ultimate control over RBS, NR and Lloyds as the major shareholder so any attempt to pretend that it can't interfere with the bonus system is Crap with a capital "C". It just reinforces what we already know, that the government is part of the problem. King is a total twat who should be sacked along with Sants and many other useless quangocrats. The bankers like Fred the Shed should already be behind bars.
Posted by: Bill Wells
Related articles
Most Read
Audio / Visual
With the industry's biggest fund managers, IFAonline welcomes you to the media centre.
This year we have 14 awards designed to mark out the very best products in a highly competitive and innovative market. This includes three new awards for 2011 to reflect the developments in this rapidly growing market: Best Dual/Multi-Index Product, Best Structured (Oeic) Fund and Best Structured Product Provider.
Events
Poll
|
|
Job search
Ifaonlinejobs will open the right investment career path for you. Search hundreds of vacancies on www.ifaonlinejobs.co.uk now
In Focus
Two months left before the ‘real RDR deadline’ – are you compliant with the required professional...
Viewpoints
2012 marks a watershed for the Life companies, fund managers, banks and advisers who service...
sponsored by
Too late as usual
Northern Rock should have been allowed to collapse, and the rest. Saving them sent out wrong signals. People who took risks by depositing above the FSCS limits should have lost their money. Why should taxpayers bail out these risk takers?
Posted by: Ken Durkin