King’s Speech Calls For Lower Pay

Mervyn King, Governor, Bank of England

Mervyn King, Governor of the Bank of England, has added his advice and opinion to the Treasury Select Committee tasked with investigating options for banking reform. Perhaps the committee is feeling left behind after the recent speeches by Barack Obama. These outlined first how banks would have to pay for the costs incurred in their rescue in 2008 and secondly how banks would be reformed, or prohibited from some “irregular” activities.

The Governor seems to share the concerns and direction taken by the President. His speech to the Select Committee contained several possible initiatives aimed at alleviating risk.

But his speech did not spell out how this country has grown dependent on the risk-taking initiative of the financial sector. Fine oratory with the benefits of hindsight is one matter. Determining public policy that encourages risk, endeavour and progress is another. The Governor should be mindful that private risk taking and wealth generation means that he gets paid every month.

Let’s note that the ultra-cautious tone set into the speeches of Mervyn King and his colleague, Andrew Haldane is anticipated behaviour. Central bankers are paid to be cautious. They are paid to be defensive. But they are not necessarily the ideal proponents of a new global banking regime. Heavens, no.