Mervyn King, at the helm of the Bank of England throughout the financial crisis, has said the banking system may not survive another crisis.
“I don’t think we’re yet at the point where we can be confident that the banking system would be entirely safe,” he told Radio 4’s Today program, according to a BBC report Monday.
His warning comes despite rules forcing banks to hold more funds to guard against the risk of a future downturn.
“I don’t think we’ve really yet got to the heart of what went wrong,” he said.
Lord King, who retired 18 months ago, said the problem of imbalances between different economies globally had not yet been solved. He also said the UK’s historic low interest rate could not continue. The UK’s interest rate has been held at a record 0.5% for more than five years.
“The idea that we can go on indefinitely with very low interest rates doesn’t make much sense,” said Lord King. However, he warned that if interest rates rose now, it “would probably lead to another downturn”.
Exciting
Lord King, who was guest editor of Radio 4’s Today on Monday, played a pre-recorded interview with former US Federal Reserve President Ben Bernanke during the program.
During the interview, Lord King said the financial crisis was “exciting” to work on. “It was exciting and it was fascinating, and it was the sort of problem that we had trained to deal with over many years,” he said.
However, the use of the word “exciting” to describe the financial crisis drew complaints from listeners, and Lord King later clarified his language: “I wanted the team around me who were working all hours of the day and night to feel this was an experience they would look back on and think not just was important for the country as a whole but they actually enjoyed it.
“So I worked very hard to make sure that there were moments of laughter,” he said.
