It’s never great when senior figures in any business are seen to be arguing in public, but when that business is the British economy and those two figures are the Chancellor of the Exchequer and the governor at the Bank of England, it’s got to be bad.
During an annual speech at Mansion House yesterday, that’s exactly what happened: Bank of England Governor Mervyn King called for the Bank to be given more powers to prevent banks from behaving badly. Darling’s reaction? ‘Erm, no’.
King argued the Bank of England should have more power to bring wayward banks into line. As it stands, the Bank can currently point out to banks they’re behaving badly but, rather like an ineffective primary school teacher dragging naughty children into the head teacher’s office, has to go to the Financial Services Authority (FSA) if it wants to get anything done.
“The Bank finds itself in a position rather like that of a church whose congregation attends weddings and burials but ignores the sermons in between,” King told the dinner.
But the Chancellor said at the same event he had ‘no plans’ to change the system of regulation – causing uproar. King’s attack was ‘devastating’, said the Liberal Democrats.
BBC business editor seems to be on King’s side. “Today’s banks are much less in awe of the Financial Services Authority than they were of the Bank of England 15 years ago, when the Bank had formal responsibility for supervising banks,” he wrote on his blog this morning.
Regardless of who is taking the side of whom, we imagine David Cameron is rubbing his hands together in anticipation. A split system of financial regulation will add more fuel to their fire, for as the old saying goes: ‘divide and conquer’.