Former Bank of England Governer Sir Mervyn King has said that the banking system is “not entirely safe” at present. Speaking to the BBC’s Today programme, Sir Mervyn said that the banking system in its current state may not be able to survive the onset of another financial crisis.
Sir Mervyn headed up the Bank of England in the role of Governor throughout the last financial crisis before retiring eighteen months ago and being replaced by current Governor Mark Carney. Speaking on the Today programme on the BBC’s Radio 4, he warned that despite the requirement banks hold greater amounts of funds as protection against further crises, he was not confident the bank would survive another major downturn.
Sir Mervyn told listeners of the programme that he does not believe that economists have realy uncovered the heart of the problem that led to the first downturn. Furthermore, he expressed the opinion that the system is not yet at a point “where we can be confident that the banking system would be entirely safe” if it had to face another crisis. In particular, he pointed to a lack of balance between the varied range of economies that exist across the globe – a problem he does not feel has been sufficiently dealt with so far.
Furthermore, Sir Mervyn expressed doubts about how long the current very low interest rates in the UK could carry on. The current interest rate has been in place for five years so far, and represents a historic low level of 0.5%.
He said: “The idea that we can go on indefinitely with very low interest rates doesn’t make much sense.” However, he did not seem to favour an immediate rise, as he conceded that an increase in rates right now would most likely result in another downturn.
Sir Mervyn did, however, attract some controversy as a result of his appearance on the programme. Over the course of the broadcast, he played an interview with Ben Bernanke, former President of the US Federal Reserve, which had been recorded previously. In the interview, he described the global financial crisis as “exciting and fascinating,” which caused a number of listeners to complain.