video transcript

Britain's economy is recovering more slowly than hoped from a financial crisis which the Bank of England should have warned about more forcefully, according to BoE Governor Mervyn King. The central bank chief, giving the first peacetime radio lecture by a BoE governor since 1939, also defended Britain's policy mix of ultra-low interest rates and tough government austerity measures. King, whose tenure as governor ends in just over a year, admitted the BoE had failed to properly identify and warn about risks facing banks in the run-up to the 2008 crisis. SOUNDBITE (English) MERVYN KING, BANK OF ENGLAND GOVERNOR, SAYING: "On all sides there was a failure of imagination to appreciate the scale of the fragilities and their potential consequences. No one could quite bring themselves to believe that in our modern financial system the biggest banks in the world could fall over, but they did. That isn't to say we were blind to what was going on, for several years central banks, including the Bank of England, had warned that financial markets were underestimating risks. So why, you might ask, did the Bank of England not do more to prevent the disaster? We should have, but the power to regulate banks had been taken away from us in 1997, our power was limited to that of publishing reports and preaching sermons. And we did preach sermons about the risks. But we didn't imagine the scale of the disaster that would occur when the risks crystallised. With the benefit of hindsight, we should have shouted from the rooftops that a system had been built in which banks were too important to fail, that banks had grown too quickly and borrowed too much, and that so-called 'light-touch' regulation hadn't prevented any of this. And in the crisis, we tried, but should have tried harder, to persuade everyone of the need to recapitalise the banks sooner and by more. We should have preached that the lessons of history were being forgotten because banking crises have happened before."