Sir Mervyn's parting shot at banks

Mervyn KingSir Mervyn King has fired his final parting shot at the banks as he attacked lenders for their intense political lobbying against tougher balance sheet rules.

In his last appearance in front of MPs on the Treasury Select Committee before handing over the reins next week, the Bank of England governor said banks sought to put "tremendous pressure" on politicians at the highest levels to lean on regulators to water down demands to raise capital strength.
%VIRTUAL-SkimlinksPromo%He said there were "certainly calls made to Number 11 (Downing Street) and even in some cases Number 10" to put pressure on the Prudential Regulation Authority (PRA).

The City watchdog last week told banks they must stump up another £13.4 billion to plug a higher-than-expected £27.1 billion hole in their finances under plans to ensure bank finances are strong enough to withstand future shocks.
"Very often it was the first response" by banks to call politicians following confidential discussions with regulators, he added. He praised the PRA for maintaining its independence, but said lobbying must stop.

Sir Mervyn - who will hand over to successor Mark Carney on Monday - also hit out at governments worldwide for failing to take advantage of the opportunity offered by massive money-printing programmes to rebalance their economies.

When asked by MP Andrea Leadsom if governments had "blown" the window created over the past five years, Sir Mervyn said they had "failed to take advantage of the time we have created". He added: "They haven't blown it yet - there's still time."

He said the UK was not near the point where QE could be unwound and called on the Government to take steps to rebalance the economy and address the trade gap while still supported by monetary efforts.

Sir Mervyn, who was outvoted once more this month in his call to extend quantitative easing (QE) by £25 billion to £400 billion, said the UK recovery was "too weak to be satisfactory" despite mounting signs of improvements in key sectors.

He also warned troubles in the wider global economy remained a risk to the UK, with the unfolding credit crunch in China "really quite significant" and the eurozone still battling debt woes.
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