Mervyn King: bail-outs created 'biggest moral hazard in history'

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By Edmund Conway

Mr King indicated that high street banks could and should be separate from their risky investment banking wings and calling for a reconsideration of the financial system's structure.

In comments which will be seen as a clarion call for a potential break-up of Britain's banks, the Bank of England Governor warned that the support handed out by the Government had "created possibly the biggest moral hazard in history". He said that it was insufficient to expect that in the future tighter regulations alone would be enough to prevent banks from generating financial crises.

The warning goes against the grain of efforts by Governments on both sides of the Atlantic, which have tacitly ruled out splitting up the biggest banks and opted instead to scrutinise them more actively. Mr King, who said earlier this year that if banks are "too big to fail, then...they are too big," said that there is a risk the financial crisis comes and goes but the current system, in which big banks enjoy an effective guarantee from the state, remains.

Mervyn King: bail-outs created 'biggest moral hazard in history' - Telegraph

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