On the 24th October, 2013 Mark Carney, the new governor of the Bank of England, made a plea for the UK to reclaim its place “at the heart of a renewed globalisation. Such engagement would be timely” he said, “because globalisation itself is under siege.”
Mr Carney called for nothing less than that regulation of the banking system should be removed from oversight by the nationalised Bank of England, and instead should take place on what Peter Kellner recently called “Planet Croesus” – that place in the economic stratosphere occupied by global bankers and beyond the reach of accountable governments. The new governor believes that regulation and management of the global banking system is best left to a body of “technicians” (that he happens to chair) based in Basel, Switzerland and set up by the G8 in 2009 – the Financial Stability Board (FSB).
“The UK” said Carney “can no longer dictate standards….for international banking and robust global markets…Rather than ruling the waves…we must spur collective action….via the FSB.” The message is plain: the British people can no longer take charge of their own banking destiny.
The FSB’S backstory:
The FSB succeeded a failed, forgotten institution, the Financial Stability Forum, established in 1999 by the UK’s Chancellor, Gordon Brown and other finance ministers. It was set up in response to the 1997 Southeast Asian crisis. Its goal was the promotion of “international financial stability.”
In that it failed – catastrophically - and at very great cost to the life chances and living standards of millions of people. So the FSF was quietly buried, only to be resurrected in 2009 under a new name: the Financial Stability Board (FSB)
Questions to the new governor
Now Mr Carney and his fellow technicians hope to restore power to the FSB and base their legitimacy on technical authority and the power of global financial markets. Can he do so without political engagement? I doubt it. Globalisation, its regulation, and its consequences - imbalances, inequality and volatility – are intensely political matters.
Second, can we trust the “technical authorities” at the FSB to warn of the next crisis?
Third, will the FSB mobilise ‘global’ resources to bail out the next failure of the banking system? Or will they again turn to Britain’s central bank for resources backed by British taxpayers, amongst others?
PRIME’s message to Mr Carney is this: British civil servants cannot escape accountability by flying to “Planet Croesus.” The governor must honour his political mandate set by an elected Chancellor: to ensure “financial stability (which) entails maintaining an efficient flow of funds within the economy and confidence in financial intermediaries.”
Mr Carney would be well advised to ensure that confidence in Britain’s financial intermediaries is once again restored; and funds flow efficiently within the economy, and especially to the job-creators - small and medium enterprises.