Speaking at the BSA annual conference last week in Manchester, he said the last 12 months have been a potent cocktail of liquidity, confidence, regulatory, political, credit and capital issues.
Cornish said: “It is fair to say that as the sector watched events unfold last summer, it did so initially with a degree of detachment and even bemusement. Northern Rock’s loss was our gain as customers took their savings from the ailing bank and gave them to us.”
Admitting that no one is now immune from the effects of the liquidity crisis, he warned that the answer to what has happened does not lie in more regulation or in rules badged as principles.
Cornish said: “Very little in the FSA’s own internal audit report into the Northern Rock crisis suggested it did not have enough rules. It was more about how they were applied – or not in this case – and crucially about the quality and continuity of the supervisory teams involved.”
He said it is vital the Bank of England remains close to what is happening in the markets and should not hesitate to intervene further, extending the £50bn special liquidity scheme if needed.
Cornish said: “There are still unresolved tensions between a Government that wants us to free up lending and keep making credit available, a regulator that wants us to hoard liquidity and capital and a central bank concerned about moral hazard.”