James Forsyth

Duncan warns of oil price rise and King of future financial crisis

Duncan warns of oil price rise and King of future financial crisis
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There are two important political interviews in today’s papers, Alan Duncan in The Times and Mervyn King in the Telegraph. Duncan, the international development minister, echoes Chris Huhne’s warning of ever higher oil prices. He also makes a rather glib remark about how “I don’t think we want to take military action so women can drive in Saudi Arabia.”

King’s interview with Charles Moore is fascinating reading. The governor fears  that there could be another banking crisis. He warns, ‘The problem is still there’. But what struck me most were his comments about the Vickers’ review of banking:

The key question, in his view, is not why an individual bank says it needs to pay bonuses (the reason cited is always the need to keep talent), but: “Why do banks in general want to pay bonuses? It’s because they live in a 'too big to fail’ world in which the state will bail them out on the downside.” They are tempted to excessive risk and excessive payments: “It is very unproductive to single out individuals. Bankers were given incentives to behave the way they did. That’s what needs to change. We must resolve this problem.” He has high hopes that the independent banking commission will do so.’

This suggests that King favours either splitting retail and investment banking or forcing banks to write so-called ‘living wills.’