UK risks ‘sleepwalking’ into another financial crisis without critical reforms

Gordon Brown has warned that Britain risks “sleepwalking” into another financial crisis if the G20 fails to create an early warning system and clamp down on the shadow banking sector.

In a speech prepared for the Bank of England’s independence conference in London yesterday, the former prime minister said another crash could be inevitable without critical reforms and better regulation.

“My belief is that governments will go sleepwalking into the next crisis unless we deliver a more effective G20, a 0 Gordon Brown singled out the ‘shadow banking system’ full early warning system and better regulation of the shadow banking system,” he said.

Mr Brown, who also served as chancellor when Tony Blair was prime minister, singled out the risks of the so-called shadow banking system, referring to financial services firms or banking activities that fall outside of standard regulation.

“If, for example, the next financial crisis comes out of Asia – and if, as likely, because of problems that arise from a shadow banking system in commercial and industrial lending, we will ask ourselves next time: Why did we not act after 2008 to create a better global early warning system and make our financial regime more fully co-ordinated globally?” he said.

Mr Brown gave the Bank of England its independence in 1997.