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...otherwise known as "The Bank of England Gets It"...
Bank of England says financiers are fuelling an economic 'doom loop'
The banking sector must be overhauled as profoundly as in the wake of the Great Depression or financiers will "game the state" over and over again, the head of the Bank of England's financial stability arm has warned.
On the eve of the G20 meeting of finance ministers in Scotland, Andy Haldane, the Bank's executive director for financial stability warned that the relationship between the state and banks represents a "doom loop" which will keep inflicting crises on the public unless arrested.
The warning, which follows Governor Mervyn King's call for investment banks to be split from their high street wings, is the most radical yet from the Bank, and comes amid growing concern that the G20 has abandoned any plans for far-reaching reforms.
It also coincided with news that the combined effect of rescuing Britain's biggest banks is likely to increase the national debt by a staggering £1.5 trillion, instantly making the UK one of the world's most indebted countries.
Mr Haldane, who was a key part of a Bank unit which was among the first to warn, well ahead of the crisis, of a dangerous gap between what banks had in their balance sheets and what they were lending customers, made the comments in a paper written with Piergiorgio Alessandri, published on Friday.
The pair diagnosed five ways in which banks capitalised on the implicit state guarantee for the financial system, saying they were "the latest incarnation of efforts by the banking system to boost shareholder returns and, whether by accident or design, game the state."
The fact that governments repeatedly bail out economies and banks following crises also undermines their pledged of "never again", they add.
"This adds to the cost of future crises. And the larger these costs, the lower the credibility of 'never again' announcements. This is a doom loop."...
The banking sector must be overhauled as profoundly as in the wake of the Great Depression or financiers will "game the state" over and over again, the head of the Bank of England's financial stability arm has warned.
On the eve of the G20 meeting of finance ministers in Scotland, Andy Haldane, the Bank's executive director for financial stability warned that the relationship between the state and banks represents a "doom loop" which will keep inflicting crises on the public unless arrested.
The warning, which follows Governor Mervyn King's call for investment banks to be split from their high street wings, is the most radical yet from the Bank, and comes amid growing concern that the G20 has abandoned any plans for far-reaching reforms.
It also coincided with news that the combined effect of rescuing Britain's biggest banks is likely to increase the national debt by a staggering £1.5 trillion, instantly making the UK one of the world's most indebted countries.
Mr Haldane, who was a key part of a Bank unit which was among the first to warn, well ahead of the crisis, of a dangerous gap between what banks had in their balance sheets and what they were lending customers, made the comments in a paper written with Piergiorgio Alessandri, published on Friday.
The pair diagnosed five ways in which banks capitalised on the implicit state guarantee for the financial system, saying they were "the latest incarnation of efforts by the banking system to boost shareholder returns and, whether by accident or design, game the state."
The fact that governments repeatedly bail out economies and banks following crises also undermines their pledged of "never again", they add.
"This adds to the cost of future crises. And the larger these costs, the lower the credibility of 'never again' announcements. This is a doom loop."...
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