By Philip Stephens
You may think the big commercial banks got away with it after the great financial crash. But what about the Bank of England? Britain’s central bank was asleep at the wheel when the storm hit in 2007. Mark Carney’s radical shake-up of personnel and responsibilities in Threadneedle Street is an uncomfortable reminder that failure is sometimes richly rewarded.
The blame does not lie with the present governor. Mr Carney was drafted in from Canada last year to replace the departing Mervyn King. The cutbacks in banking supervision that preceded the crash came on the now Lord King’s watch. A reorganisation that leaves Mr Carney with a total of five deputies, however, is a reminder of just how much additional power has accrued to the Bank during the past few years. When the BoE was first granted independence during the late 1990s, the then governor happily settled for two deputies. Read more
By James Politi in Washington
In his final press conference before heading to Martha’s Vineyard, an island off the coast of Massachusetts, for summer holidays, president Barack Obama was asked about his looming pick to succeed Ben Bernanke as Federal Reserve chairman.
We’ll try to parse his words, like a Fed statement.
On timing – Mr Obama repeated that he would make the decision in the autumn, which technically begins September 22. But some speculate that a choice could come sooner. Mr Obama might take the time over the holiday to ruminate and, perhaps inspired by the Atlantic ocean breeze, even make up his mind one way or the other.
On names – Mr Obama confirmed that Janet Yellen, the vice-chair, and Larry Summers, the former Treasury secretary and a top White House economic adviser in 2009 and 2010, are the leading candidates, mentioning them by name and calling them “terrific people”. Interestingly, he left out Don Kohn, a former Fed vice-chair who he had mentioned as a possibility in meetings with congressional Democrats last week. But he did say there were a “couple of other candidates” too. Read more
Emma Saunders leaves the FT on Friday to return to banking.
We thank her for her contributions and wish her all the best in her new role.
Greece needs time to convince international investors about its reform programme and may not be able to return to financial markets next year as planned, its finance minister has admitted.
George Papaconstantinou’s comments in a Financial Times interview highlight how Greece continues to struggle to turn its economy round almost a year after the launch of an €110bn European Union and International Monetary Fund bail-out. They may fuel speculation that European leaders will have to find fresh ways of alleviating Greece’s debt problems to avert a default scenario. Read more
The US lacks a “credible strategy” to stabilise its mounting public debt, posing a small but significant risk of a new global economic crisis, says the International Monetary Fund.
In an unusually stern rebuke to its largest shareholder, the IMF said the US was the only advanced economy to be increasing its underlying budget deficit in 2011, at a time when its economy was growing fast enough to reduce borrowing. The latest warning on the deficit was delivered as Barack Obama, the US president, is becoming increasingly engaged in the debate over ways to curb America’s mounting debt. Read more
Turkey’s banking industry could be damaged unless the central bank reverses last year’s decision to stop paying interest on required reserves, the head of one of the country’s biggest lenders claims.
Suzan Sabanci, chairman of Akbank, told the Financial Times that new rules requiring banks to lodge 15 per cent of short-term lira deposits with the central bank risked fundamentally weakening banks unless they received interest in compensation. “The government is trying to be cautious that the economy doesn’t grow too fast. And I agree with that,” she said. “But we need to be recompensed. They should start paying interest in six months’ time.” Read more
A senior Portuguese banker has said that the European Central Bank pressed the country’s lenders to stop increasing their use of its liquidity – setting in train events that led Lisbon to ask for a bail-out this week.
António de Sousa, head of the Portuguese Banking Association, said that the message from the ECB and Portugal’s central bank not to expand their exposure to ECB funding further came a month ago. Read more