The Herald

Governor Carney in attack on City greed

Carney in attack on City greed

- JOHN-PAUL FORD ROJAS

BANK of England governor Mark Carney has turned his fire on City greed and the problem of growing inequality. In a speech in London last night, the Canadian called for more to be done to clamp down on scandal-hit financial markets. Referring to banking bonuses, Mr Carney said globalisat­ion had resulted in huge earnings that were “amplifying the rewards of the superstar” while opportunit­ies for social mobility were narrowing.

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 scandalhit 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.

MrCarney 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.

“Nowis 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 ma d e his remarks at the Conference on Inclusive Capitalism in London last night.

 ??  ?? MARK CARNEY: Says public trust in finance world was eroded.
MARK CARNEY: Says public trust in finance world was eroded.

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