Jesse Norman writes in the FT that what is really needed in the UK is a financial truth and reconciliation commission to analyse the crash, including the role of officials at the Treasury, the Financial Services Authority and the Bank of England, which were all deeply implicated. The Vickers commission is not that.
The Independent Banking Commission, led by Sir John Vickers, has the potential to be quietly revolutionary in the way it reshapes the banks. In its interim report in April it set out a coherent direction of travel. But it now has a huge challenge to articulate a set of detailed, cogent proposals and build a consensus around them. Moreover, the stakes are getting higher.
The 2008 crash occurred because the financial sector as a whole, and specific institutions within it, became over-indebted; because they took huge risks that they either did not understand or ignored; because those risks were assessed using standard models whose failure created a stampede when the crisis struck; because the banks in question were grossly under-supervised; and because governments, especially the UK government, became reliant on the banks for tax revenue and egged on the sector’s growth with loose monetary policy and light regulation.
Last week Moody’s indicated it could downgrade 14 UK lenders. The stakes for the commission are dizzyingly high and are increasing.
© Financial Times
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