Darling attacks 'kamikaze' bankers

Published on Saturday 4 July 2009 22:04

ALISTAIR Darling last night hit out at "kamikaze" bankers for damaging the British economy.

The Chancellor accused banks of ignorance and irresponsibility, and promised that reforms would be put in place this week to prevent a repeat of the current banking crisis.

He said: "We need to learn lessons from the financial crisis in which banks behaved in a kamikaze manner and the regulatory system failed. Far too many people in boardrooms did not know, nor understand what was happening in their institutions.

"We know now no authority in the world understood the true risks to the system or the likely consequences. That needs to change. I want a new banking system we can all rely on and which will be the foundation of our new prosperity."

The Chancellor has previously indicated that a forthcoming white paper will include new powers for the Bank of England and Financial Services Authority. Proposed reforms will deliver "tougher regulation and more rigorous monitoring and managing of system-wide risks so we can make sure we are able to deal with failures when they arise."

He promised regulators would be given more powers to call banks to account, adding: "Businesses need to be able to borrow, families need to get mortgages. The stakes are high, but a stable financial world is a goal we are determined to achieve."

On Friday, Darling played down reports of a turf war between Bank of England governor Mervyn King and the FSA, led by Lord Turner, over who will wield powers to regulate the banks.

He indicated that the white paper will retain the tripartite regulatory system which divides responsibility between the Bank, FSA and Treasury. The Bank is expected to be given a central role in preventing future booms from turning into bubbles and assessing risks to the system, as well as to individual banks.

The FSA will be told to take a more proactive approach to preventing bonuses that reward short-term profits. Banks are expected to be required to hold bigger capital reserves to provide a safety net.

Darling is thought likely to reject King's call for banks to be split between their risky investment sides and their safer retail operations.