• Text size      
  • Send this article to a friend
  • Print this article

Bank of England governor calls for inequality action

Bank of England governor Mark Carney has turned his fire on City greed and the problem of growing inequality as he called for more to be done to clamp down on scandal-hit financial markets.

Mr Carney said globalisation had resulted in huge earnings which were "amplifying the rewards of the superstar" while "disturbing evidence" suggested opportunities for social mobility were narrowing.

His remarks are likely to be seen as an attempt to counter claims that the former Goldman Sachs banker was a cheerleader for the City, following a speech last year which was viewed as a departure from the scathing tone of his predecessor.

They saw Mr Carney defend the role of the Bank for stimulating jobs through low-interest rate policies - though he admitted this had also caused a redistribution of wealth that hit savers.

Mr Carney attacked a belief in "market fundamentalism", which he said through light-touch regulation and ignoring risks contributed to the financial crisis and the ensuing damage to society.

He called for more codes of conducts for "specific markets" and new regulations in the wake of scandals over the manipulation by traders of benchmark interest rates such as Libor and foreign currency exchange. The governor said in the run-up to the crisis "banking became about banks not businesses" while financial products designed to meet the needs of firms "morphed into ways to amplify bets on financial outcomes".

"When bankers become detached from end-users, their only reward becomes money.

"Purely financial compensation ignores the non-pecuniary rewards to employment, such as the satisfaction from helping a client or colleague succeed," said Mr Carney, whose own annual pay package is worth £874,000.

Public trust in the financial system had been eroded after taxpayers picked up the tab for financiers' failures, he added.

"Bankers made enormous sums in the run-up to the crisis and were often well compensated after it hit," he said.

Mr Carney added: "Inequality of outcomes both within and across generations has demonstrably increased. Returns in a globalised world are amplifying the rewards of the superstar and, though few of them would be inclined to admit it, the lucky.

"Now is the time to be famous or fortunate.

"There is also disturbing evidence that equality of opportunity has fallen, with the potential to reinforce cultural and economic divides."

Mr Carney defended the role of central banks in slashing interest rates and pumping billions into economies to nurse them back to health in the financial crisis.

He said not to have acted "would have been catastrophic for all" but that the "distributional consequences" had been significant in "benefiting borrowers at the expense of savers".

Mr Carney said redistributing wealth between rich and poor or young and old were political but that in extreme circumstances such as after the financial crisis the Bank could have "some limited influence on social mobility and intergenerational equity".

Central banks had faced "clear risks of a misplaced if not lost generation" which had been sharply reduced in Britain following the Bank's policies.

Mr Carney made his remarks at the Conference on Inclusive Capitalism in London last night.

Contextual targeting label: 
Finance

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

236517