%VIRTUAL-SkimlinksPromo%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 scandal-hit 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 also 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 had hit savers.
Mr Carney attacked a belief in "market fundamentalism", which he said through light-touch regulation and ignoring risks contributed directly 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.
Mr Carney added: "Within societies, virtually without exception, 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. Now is 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.
"These have helped support the strongest job growth on record including record-high transitions back into employment by the longer-term unemployed. Longer-term social mobility will benefit from this track record."
Mr Carney's remarks, at the Conference on Inclusive Capitalism in London, focused on four key areas of where reform to the financial system was needed to rebuild trust.
The first was by ending the spectre of "too big to fail" which forced taxpayers to bail out banks whose collapse would severely disrupt the financial system.
This followed earlier remarks in a speech by International Monetary Fund (IMF) managing director Christine Lagarde at the same event that this problem had not yet been solved.
She said there remained an "implicit subsidy still going strongly" amounting to about 70 billion US dollars (£42 billion) in the US and up to 300 billion US dollars (£179 billion) in the eurozone.
Mr Carney also referred to creating "fair and effective markets" as well as current proposals on clawing back bonuses and building bankers' sense of responsibility.
"The combination of unbridled faith in financial markets prior to the crisis and the recent demonstrations of corruption in some of these markets has eroded social capital," he said.
Reforms would help "deliver a more trustworthy, inclusive capitalism", he said.
Mr Carney's remarks appear to counter some of the reaction to a speech last November in which he
defended the UK's financial system and its potential to be a "global good and a national asset".
Those comments were seen as contrasting with the tone of his predecessor Lord King who had spoken out about the "deceitful" behaviour of some bankers and their "shoddy" treatment of customers.
10 things your bank doesn't want you to know
Carney attacks City 'money rewards'
Once you have opened a current account with a bank or other lender, you will get a steady flow of emails, letters (and maybe phone calls) offering you a savings account, loan, mortgage, ISA etc to go with it. But while it may be tempting to have everything in one place, it's better to do the legwork and shop around for the best financial products. You can compare interest rates on loans and savings accounts in the 'best buy' tables in the newspapers, or look online on comparison sites. Remember you can still easily transfer your money between accounts, even if they are not with the same financial institution.
Whether you want to apply for a new mortgage or refinance an existing one, your bank will probably be very happy to give you an instant quote in the hope that you will go with them. They may not tell you that you can shop around at other lenders. A mortgage broker can give you an overview of the best interest rates on offer, and might be able to cut you an even better deal him/herself.
Want to cash in your jars of change that are sitting on your shelves at home? Many banks are not very keen on coins. They often only take it from their own customers. You will have to sort it into different denominations and put the coins in the bank's bags in set amounts (for example, £1 for coppers, £5 for silver, etc). Some banks only take a limited number of bags a day, or won't take any at busy times. Others take a different view: HSBC has free coin deposit machines in many larger branches where you pour your jar of coins into the machine and it counts them and automatically credits your account. Barclays, NatWest and RBS also have machines in large branches in city centres.
Bank employees now have a duty to point out that they only advise on the bank's products and don't offer independent financial advice. What they won't tell you is that even the advice they give you about the bank's own products should be treated cautiously. Bank staff are often undertrained, underpaid and overworked. (You could ask for the employee's qualifications before getting advice.) So do your own research and/or find an independent financial adviser.
Nothing is set in stone. Your bank won't tell you this, but sometimes it will waive a fee, for example an overdraft or an ATM fee, depending on the circumstances. You have nothing to lose by asking, if you can argue persuasively why they should waive the fee. Citizens Advice says your bank should treat you sympathetically if you can show financial hardship.
As stated in the previous slide, some things are negotiable – such as interest rates or waiving fees – if you can make a good case for it. In that instance, talking to an employee in person is better than filling in a form online.
If your account is overdrawn and you get paid, your bank could use this money to pay off your overdraft without your permission. However, you have a right to ask them not to do this so you can pay your rent or mortgage first. This is called first right of appropriation. You have to ask your bank in writing, and you'll need to write to them with new instructions every time money gets paid into your account. Make sure you write 'first right of appropriation' in your letter.
If money is mistakenly credited to your account, your bank or building society can recover the money, assuming they do this within a reasonable time. But you may be allowed to keep the money, for example if you didn't realise the bank had made a mistake and spent the money in good faith. You would have to prove that you spent it in such a way that it would be unfair to ask you to pay it back. You can complain to the Financial Ombudsman if you think your lender is being unfair in asking you to repay the money.
If you do have to pay it back, you could try to reach an agreement with your bank to pay it back in instalments without interest being added.
The Financial Ombudsman Service has more advice on what happens when payments have been credited to the wrong account. If you did something wrong - for example, by entering the wrong account number - rather than the bank, the Financial Ombudsman may still uphold your complaint. They consider whether the financial institution made it clear to the consumer that only the bank sort code and account number are used to process the payment, rather than the name of the payee. They will also ask whether the lender should have realised that the consumer had made mistake, and once the problem came to light, did the firm take reasonable steps to try to get the money back from the recipient.
If too much is deducted from your account, your lender may have to refund the full amount of the payment. For example, if the money is taken through a direct debit or credit card payment for a hotel room or car rental. When deciding whether the debit was reasonable, the bank or building society will take into account your previous spending pattern. But the bank doesn't have to refund the payment if you agreed the amount beforehand or were informed of the payment by your lender at least four weeks before.
If you don't have enough money in your account to cover a direct debit payment, your bank may not make the payment. It doesn't have to tell you that the payment hasn't been made, so the onus is on you to keep checking your account. If, on the other hand, the payment goes through, you may be charged for an unauthorised overdraft.