Blanchflower: Return of banking regulation to the BoE is a mistake

1 June 2011 8:55 am | By Chris Salih

Former Bank of England MPC member David Blanchflower has said that the return of banking regulation to the Bank of England is a mistake and that it is probably because the Government wants a “toothless watchdog”.

In an interview with the Telegraph, Blanchflower said that the BoE has not done well in the past five years, having missed the biggest recession in the past century.

He said: “Giving the BoE more power seems like a mistake in the sense that what we’ve learnt is you should diversify your portfolio, so what we’re seeing here is giving all the power to one institution, which may well be a mistake,’

Blanchflower said there is no reason to suggest that the BoE can handle parts of regulation now that it has failed to cope with in the past.

He said: ‘The question you ask yourself, have we learnt the errors of the greatest recession, have we made fundamental change and are we going to prevent those mistakes happening in the future. The answer is probably not.”

“It is probably because the Government wants toothless regulation.”

Blanchflower said it is not impossible to rule out another banking crisis.

He said: “The issues we are seeing with the sovereign debt crisis are not independent from the UK and if the crisis in Ireland goes further it can impact on the UK.”

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