Brown warns on the risks of financial crisis

PA

The former prime minister, Gordon Brown, has warned that the UK and other major economies are not well-equipped for the next financial crisis.

Mr. Brown, who was the Number 10, during the banking crash of 2007-8, says they need to guard against “complacency” or “not be aware” of the risks.

The next crisis could come from Asia, the shadow banking sector, he suggested.

In the UK, the government must work more closely with the Bank of England to ensure financial stability, he added.

Mr Brown, who served as chancellor from 1997 to 2007 and prime minister until 2010, was to speak at an event marking 20 years since he made the Bank independent.

At the same event, the Prime Minister, Theresa may, has stated that the Bank had been “strengthened and improved” since the financial crisis.
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Ten years since the financial crisis
The next financial crisis

Mr Brown has warned the next financial crisis could come from Asian banks, which are not subject to regulatory oversight, known as the “shadow banking”.

“If the crisis were to emerge, would we really know who owed what to whom, and on what terms?” Mr. Brown has said.

He suggested that the G20, the group of the world’s biggest economies has not done enough to ensure the monitoring of these or other financial risks.

Reuters

As a result, he said, the “dangers of complacency or simply not be aware of what is going on in the world arise”.

He added that the cooperation put in place during the financial crisis, he helped to lead had been watered down since 2010.UK bank ‘exposed’

Critics have said that the Treasury, under Mr Brown’s leadership as chancellor, was too slow for the spot of the crisis of 2007 and 2008, as well as the City regulators and the Bank of England.

Some have suggested Mr Brown’s decision as chancellor to split financial regulation between these three organizations contributed to the crisis.

PA

But on Thursday, Mr. Brown said the failure came about, because they do not work together closely enough.

He warned that a decade later, the Bank was left “exposed” as the main financial regulator, which would “haunt us if a crisis were to hit Britain”.

“There’s no way you’re going to face a crisis, unless the Bank and the government work together,” he said.

Mr. Brown suggested that the Treasury and the Bank should put in place a joint working group to deal with financial stability.

On Thursday, Mrs May that the relationship with the Bank, saying that it was the role of the government to ensure the economy serves “the interests of the ordinary working people”.

The Conservatives reformed the financial regulation after the crisis, with the Bank at the centre of the system through the Financial Policy Committee.

The Treasury is also in contact with the Bank through regular meetings, and a non-voting official on the Bank’s interest-rate committee.