A group of leading financial analysts quiz Britain’s top regulator on what went wrong, while experts including Robert Kuttner and Oliver Kamm offer their responses.by Adair Turner / August 27, 2009 / Leave a comment
Exclusive online responses from Tim Congdon, George Magnus, Oliver Kamm and Robert Kuttner
The Prospect interview panel
John Gieve is chairman of financial transaction specialists VocaLink and formerly deputy governor of the Bank of England
Jonathan Ford is commentary editor of Reuters and an associate editor of Prospect
Gillian Tett is an assistant editor of the Financial Times, specialising in global financial markets
Paul Woolley is a senior fellow at LSE, where he founded a centre for the study of capital markets
Jonathan Ford What stage have we got to in the crisis?
Adair Turner I think we are well-advanced in the evolution of the financial aspect of the crisis—the extreme public policy interventions which followed the crisis last October have stabilised the system. We do now have banks which have adequate capital. I think there are still some issues across the world as to whether we have full transparency. But most countries have made sure their banks are capitalised to deal with the future. So I think we are beyond the point of fragility.
Economically, we are at some sort of turning point, in the sense that the period of extreme GDP fall has occurred. We are seeing increases of GDP in some parts of the world, like China and much of Asia, and in the developed countries we are probably on the turn. But what we don’t know is how rapid that process of economic recovery will be and whether it will be constrained by either a very cautious banking system or by the scale of public sector debt overhanging many of the big economies. But the more fundamental thing, especially for regulators like me, is to realise that what has occurred has imposed huge economic harm throughout the world and so we really do have to work out how to stop it happening again in five or ten years’ time. And that requires a very major reconstruct of the global financial regulatory system, and I don’t mean a minor adjustment.
Ford George Osborne, the shadow chancellor, has put forward proposals that would transform the tripartite regulatory regime in Britain, effectively abolishing the FSA, moving its banking supervisory functions back into the Bank of England and creating a new consumer protection body. Do you think that’s a sensible move?
Turner The institutional architecture is the least important issue here. If you look around the world, some…