King still does not think UK banks are safe enough

The UK banking system is stronger than it was after almost putting the country on its knees ten years ago, but the people who oversaw the crash still fear a rehearsal.

"The big lesson for me is that even though the banks are safer than they were, they are not safe," said Mervyn King, who was the governor of the Bank of England at the time. financial crisis. Victoria Cleland, one of the top-ranked women in the central bank after being exploited to help contain the damage of Northern Rock, said the risk awareness was even greater.

King, Cleland and others say there is still work to be done after the crisis that led to the abandonment of the so-called lightweight, principled framework that the United Kingdom boasted about in the Gordon years Brown as Minister of Finance. King's recipe for preventing a review: ensuring that lenders have sufficient guarantees from the central bank to justify acting as lender of last resort, by restoring the liquidity of the financial system.

"It is essential to determine the conditions under which these loans will be made in advance, to ensure that banks have sufficient guarantees to justify these loans and that they are large enough to allow the central bank to lend. enough money to prevent these loans. bankruptcy and bankruptcy of the system, "said King, who was replaced by Mark Carney in 2013 and who is now back in academia.

For Carney – who is one of those who blame policymakers of the crisis for being too concerned about the dangers of moral hazard – big lenders still can not be solved without tapping into taxpayer funds. The governor has repeatedly said that until the debt securities intended to replenish the capital of a collapsed bank are fully in place, the banks will not be fully resolved.

The collapsed bank that triggered the crisis was Northern Rock, a mortgage lender who lost access to short-term funding a year before the collapse of Lehman Brothers. The largest rescue was the Royal Bank of Scotland group, which totaled more than £ 45 billion ($ 60 billion at today's exchange rate), the largest bailout in the world. world.

Cleland has been posted to the Northern Rock base in the north of England and remembers a punctual pizza dinner policy to contain the damage caused by the nationalization of the bank. Later, she was assigned to Bradford & Bingley, another real estate lender supported by the state.

"The world is not perfect – there is still a lot of work to be done to develop better resolution and release plans, recognizing what can go wrong," said Cleland, who is now Director of Banks. , said in an interview. She contributed to the creation of the BOE Special Resolution Unit and also designed elements of the 2009 Banking Law.

"What has been learned is that you can plan a million things – but there will always be something different," Cleland said.