King backs calls for reform

Mervyn King

Mervyn King is reportedly backing proposals that call for a grossly radical reform of the global banking sector. However, King also added concerns that rushing a reform could cause unnecessary risk to the wider global economy.

King, who is the governor of the Bank of England, told the Treasury Committee today that while major change was needed, it should not be rushed at the risk because of the wider financial services community. His warning said that, while reform was needed, it should not include limits on banks' sizes; and a situation was now needed that meant taxpayers did not bail-out any failing banks in the future.

New limits

The meeting comes just days after US president Barack Obama proposed similar regulations on the activities of US banks, in an attempt to prevent future financial crises.

Obama's outlined proposals, which have been signalled as the most far reaching proposals on banks' activities to date, do include limits to the size of banks and restrictions on riskier trading. However, King told policymakers that he believed that "while proposals announced [by Obama] last week did make it very clear that radical reform is on the table, these remain very difficult questions [...] there are no simple answers."

According to the BBC, the most important thing is that "we are prepared to countenance major reform.

"We need to recognise a range of different solutions will be necessary. It won't be easy to bring about, and we can't do it overnight."

Reports suggest that, instead, King hopes that international agreement could be found "by the end of this year" over the changes needed and that, from there, the "vital" changes that are needed can be achieved.

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