Mervyn King slams banks for putting profits before people and preying on the vulnerable

Daily Mail, by DAILY MAIL REPORTER, 5th March 2011

Mervyn King said problems in the banking
sector still remained and 'imbalances' in
the system were 'beginning to grow again'

The Governor of the Bank of England has slammed high-street banks for preying on the 'gullible or unsuspecting' and urged them to take a longer-term approach to their business and not simply try to 'maximise profits next week'.

Mervyn King also warned Britain risks suffering another financial crisis unless fundamental reforms of the profit-obsessed banking sector are pushed through.

He said problems still remained and 'imbalances' in the system were 'beginning to grow again'.

The intervention, in an interview with the Daily Telegraph, comes as a Government commission is considering whether financial institutions should be forced to separate retail and investment banking arms.

'We allowed a (banking) system to build up which contained the seeds of its own destruction,' Mr King said.

'We've not yet solved the 'too big to fail' or, as I prefer to call it, the 'too important to fail' problem. The concept of being too important to fail should have no place in a market economy.'

Asked if there could be a repeat of the financial crisis, Mr King said: 'Yes. The problem is still there. The search for yield goes on. Imbalances are beginning to grow again.'

Mr King suggested that the culture of short-term profits and bonuses could be to blame for the issues. Traditional manufacturing industries had a more 'moral' way of operating.

More...

• 'Tortured on the telephone' over loan of £20,000: Judge attacks credit card firm and axes debt Standard Chartered hits out at messy banking rules
  
  
• 'They care deeply about their workforce, about their customers and, above all, are proud of their products,' he said.

'(With the 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.

'If it's possible (for financial services firms) to make money out of gullible or unsuspecting customers, particularly institutional customers, that is perfectly acceptable.'

King stood by previous comments that appeared to endorse the
coalition's strategy for reducing the deficit. Shadow chancellor
Ed Balls has warned the governor against becoming too political

However, good businesses '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', according to the governor.

He stood by previous comments that appeared to endorse the coalition's strategy for reducing the deficit. Shadow chancellor Ed Balls has warned the governor against becoming too political.

But Mr King said: 'It is inconceivable that the governor has no view on the size of the deficit and the need to reduce it.

'It would be a dereliction of duty for me not to warn. You need a credible plan to reduce it, over the lifetime of a Parliament. But it is for ministers, not for me, to say how this should be done.'

Pressed on the chances of an imminent interest rate rise - potentially as early as next week - Mr King said there was a 'perfectly reasonable case for doing it now'.

But he added that increasing rates too soon would be a 'futile gesture'.

Related Articles:

Mervyn King blasts banks for exploiting customers

Mervyn King: Banks putting profits before customer

Time to ‘Make Wall Street Pay’

21 airlines fined for fixing passenger, cargo fees