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Bank of England governor Mervyn King 'out of touch' , says City
Senior City figures have reacted with anger to Mervyn King's forthright attack on the financial services sector, calling his suggestion that banks routinely exploit millions of customers an "insult".
Bankers, businessmen and economists joined together to dismiss the bulk of the Bank of England Governor's comments, with some even questioning whether he should remain in his post.
One senior banking source, at one of the UK's top five banks, went so far as to brand Mr King "an embittered old man with no appreciation of reality".
The anger follows an interview the Governor gave to The Daily Telegraph yesterday, in which Mr King said that the finance industry needs urgent reform and that there is a risk of a second banking crisis.
Although Mr King has made it clear in a number of recent speeches that he favours the separation of investment banks from retail banks, the tone and nature of some of his comments went further than ever before.
Mr King accused banks of destroying companies through their obsessions with short-termist takeovers, hit out at the City's bonus obsession and warned that "imbalances" in the banking system "are beginning to grow again".
But the interview, which coincided with Mr King's 20-year anniversary as a Bank employee, was criticised for both its tone and content. One leading City chairman said: "Mervyn is putting himself in a dangerous position. He appears to live in a different world and makes comments that are not realistic. It is clear he doesn't like bankers and that is not the correct position for a man in his position."
The senior banking source, who asked not to be named, delivered the harshest criticism, calling Mr King's speech "an insult" and saying "the suggestion hundreds of thousands of British bankers get up every morning to focus on ripping off customers is simply untrue". He continued: "It's an extraordinary interview.People are concerned that someone in his position would say such things, more in sorrow than anything."
Angela Knight, head of the British Bankers' Association, said: "We do agree banks should be getting closer to their customers. There is more that needs to be done, but the UK has done a lot more than others."
A former member of the Bank's Monetary Policy Committee highlighted Mr King's own role in the run-up to the crisis.
In the interview Mr King made only one reference to his actions, saying he wished he had "spoken out more forcefully about the build-up of leverage".
The former MPC member said: "He is too kind to himself and to the Bank. Actually, if you look at the historical record, he completely missed most of the problems and even in August of 2007 was still saying that securitisation was a good thing. Frankly, he is trying to rewrite history."
Others pointed to the motives behind the timing of Mr King's interview, given the government-appointed Independent Commission on Banking is due to publish an interim report next month on whether to break up full-service banks.
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