Bank of England governor Mark Carney warned Britain's high street banks that they risk becoming socially useless unless they focus on the real economy and help businesses invest and create jobs.
Carney, a former Goldman Sachs financier, said the banking industry needs to be aligned with the business community and not "disconnected from society".
Speaking a day after he announced plans to keep interest rates at 0.5% for the next three years, he also stressed that mis-selling products to customers to turn a profit undermines the effectiveness of banks.
Carney, who was boss of Canada's central bank before joing the BoE last month, told BBC Radio 4's Today programme: "The cultural issue is fundamentally important. There has to be a change in the culture of these institutions.
"I think finance can absolutely play a socially useful and an economically useful function but what it needs in order to do so, the focus has to be, of the financier, the people working in the banking system, has to be on the real economy, what it does for businesses making investment, what ultimately it means for jobs in the economy.
"And it's the loss of that focus, it's finance that becomes disconnected from the economy, from society, finance that only talks to itself and deals with each other, that becomes socially useless.
As governor, Carney chairs the monetary policy committee (MPC), which sets interest rates, and acts as chief watchdog over the banking system in his role as chair of the financial policy committee (FPC).
When he was headhunted by George Osborne last year Carney had risen to international prominence as a member of the Financial Stability Board, an offshoot of the G20 given the task of setting international standards for banks most likely to cause a repeat of the 2008 financial crash.
Asked whether people working for banks should sell a product to a customer to make a profit, even if they know the product was bad for the customer, Carney said: "Absolutely you shouldn't sell it. "Let me be absolutely clear as well, the type of behaviour you're talking about is conduct behaviour.
But let me say as governor of the Bank of England, and this is something that is shared by my colleagues, it's that attitude which indicates even if we're not directly responsible for that behaviour, it's that attitude in institutions that undercuts their effectiveness, is bad for the system, and to the extent that with our powers we can use them, we work to snuff them out."
Carney said he wanted to promote more women into prominent positions at the bank after being struck by their absence when he arrived.
"It is an astounding situation," he said. "We need to grow women into roles as top economists here and get them in a position where they can apply to be the next governor."
The betting firm Paddy Power said Sheila Dow, emeritus professor at the University of Stirling, was the frontrunner at 3/1 to succeed Carney should an all women shortlist be drawn up, followed by HSBC's European economist Janet Henry at 4/1 and Morgan Stanley's UK economist Melanie Baker at 5/1.
Former Whitehall economist Vicky Pryce, who was jailed earlier this year for perjury, was ranked a 66/1 outsider.
The governor also said he had "tremendous sympathy" for savers hit by the BoE's announcement that interest rates will not rise from their record low until more than 750,000 new jobs have been created.
Households and businesses have been told not to expect interest rate rises until 2016 after the MPC said rates will remain at 0.5% until the unemployment rate drops to 7%, depending on stable inflation.
In a direct rebuff to critics of the BoE's low interest rate policy, he said reducing the stimulus to the economy risked choking off the economic recovery and repeating Japan's lost decades, where interest rates have remained at rock-bottom levels for almost 25 years.
Carney said the best way to get back to normal interest rates is to have a strong economy. He told the programme: "I first lived in this country in the 1980s. After that I lived in Japan and it was the start of life after the financial crisis and in Japan they made two mistakes.
"The first was they didn't fix the banks quickly enough – in the UK we are fixing the banks. Secondly, as their recoveries began, they pulled back on stimulus too early and those recoveries didn't gather life and as a consequence, almost a quarter-century later, interest rates are still at rock-bottom levels in Japan. "We don't want to make those mistakes here in the UK.
This is about ensuring that in the reasonable future, and I recognise that it's difficult for savers, but in the reasonable future we're delivering that strong economy that will deliver higher interest rates and jobs."
The prime minister, David Cameron, insisted he was "confident" the economy would create jobs, and hailed Carney's forward guidance on interest rates as a vote of confidence in government policy.
theguardian.com
Carney, a former Goldman Sachs financier, said the banking industry needs to be aligned with the business community and not "disconnected from society".
Speaking a day after he announced plans to keep interest rates at 0.5% for the next three years, he also stressed that mis-selling products to customers to turn a profit undermines the effectiveness of banks.
Carney, who was boss of Canada's central bank before joing the BoE last month, told BBC Radio 4's Today programme: "The cultural issue is fundamentally important. There has to be a change in the culture of these institutions.
"I think finance can absolutely play a socially useful and an economically useful function but what it needs in order to do so, the focus has to be, of the financier, the people working in the banking system, has to be on the real economy, what it does for businesses making investment, what ultimately it means for jobs in the economy.
"And it's the loss of that focus, it's finance that becomes disconnected from the economy, from society, finance that only talks to itself and deals with each other, that becomes socially useless.
As governor, Carney chairs the monetary policy committee (MPC), which sets interest rates, and acts as chief watchdog over the banking system in his role as chair of the financial policy committee (FPC).
When he was headhunted by George Osborne last year Carney had risen to international prominence as a member of the Financial Stability Board, an offshoot of the G20 given the task of setting international standards for banks most likely to cause a repeat of the 2008 financial crash.
Asked whether people working for banks should sell a product to a customer to make a profit, even if they know the product was bad for the customer, Carney said: "Absolutely you shouldn't sell it. "Let me be absolutely clear as well, the type of behaviour you're talking about is conduct behaviour.
But let me say as governor of the Bank of England, and this is something that is shared by my colleagues, it's that attitude which indicates even if we're not directly responsible for that behaviour, it's that attitude in institutions that undercuts their effectiveness, is bad for the system, and to the extent that with our powers we can use them, we work to snuff them out."
Carney said he wanted to promote more women into prominent positions at the bank after being struck by their absence when he arrived.
"It is an astounding situation," he said. "We need to grow women into roles as top economists here and get them in a position where they can apply to be the next governor."
The betting firm Paddy Power said Sheila Dow, emeritus professor at the University of Stirling, was the frontrunner at 3/1 to succeed Carney should an all women shortlist be drawn up, followed by HSBC's European economist Janet Henry at 4/1 and Morgan Stanley's UK economist Melanie Baker at 5/1.
Former Whitehall economist Vicky Pryce, who was jailed earlier this year for perjury, was ranked a 66/1 outsider.
The governor also said he had "tremendous sympathy" for savers hit by the BoE's announcement that interest rates will not rise from their record low until more than 750,000 new jobs have been created.
Households and businesses have been told not to expect interest rate rises until 2016 after the MPC said rates will remain at 0.5% until the unemployment rate drops to 7%, depending on stable inflation.
In a direct rebuff to critics of the BoE's low interest rate policy, he said reducing the stimulus to the economy risked choking off the economic recovery and repeating Japan's lost decades, where interest rates have remained at rock-bottom levels for almost 25 years.
Carney said the best way to get back to normal interest rates is to have a strong economy. He told the programme: "I first lived in this country in the 1980s. After that I lived in Japan and it was the start of life after the financial crisis and in Japan they made two mistakes.
"The first was they didn't fix the banks quickly enough – in the UK we are fixing the banks. Secondly, as their recoveries began, they pulled back on stimulus too early and those recoveries didn't gather life and as a consequence, almost a quarter-century later, interest rates are still at rock-bottom levels in Japan. "We don't want to make those mistakes here in the UK.
This is about ensuring that in the reasonable future, and I recognise that it's difficult for savers, but in the reasonable future we're delivering that strong economy that will deliver higher interest rates and jobs."
The prime minister, David Cameron, insisted he was "confident" the economy would create jobs, and hailed Carney's forward guidance on interest rates as a vote of confidence in government policy.
theguardian.com
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