MercoPress. South Atlantic News Agency

Bank of England governor admits more should have done to prevent the crisis

Mervyn King: BoE should have done more, but “the bank's hands had been somewhat tied”

After coming under fire for years for refusing to accept responsibility for the crisis, Bank of England governor Mervyn King said in his BBC Today Program Lecture that the BoE should have done more -- but added that the bank's hands had been somewhat tied.

“So why, you might ask, did the Bank of England not do more to prevent the disaster? We should have,” he said.

“But the power to regulate banks had been taken away from us in 1997. Our power was limited to that of publishing reports and preaching sermons.

”And we did preach sermons about the risks. But we didn't imagine the scale of the disaster that would occur when the risks crystallised.

“With the benefit of hindsight, we should have shouted from the rooftops that a system had been built in which banks were too important to fail, that banks had grown too quickly and borrowed too much, and that so-called 'light-touch' regulation hadn't prevented any of this.

”And in the crisis, we tried, but should have tried harder, to persuade everyone of the need to recapitalize the banks sooner and by more.

“We should have preached that the lessons of history were being forgotten -- because banking crises have happened before.”

Many analysts believe Mr King made the crisis worse than it would otherwise have been, by initially denying troubled banks the emergency funding they desperately needed in the early months of the debacle.