CITY watchdog chief Adair Turner last night presented his plan for a safe and prosperous financial sector, in a speech that appeared to set out his stall to take over as the new head of the Bank of England.
With Sir Mervyn King stepping down as governor of the Bank next year, Turner is a frontrunner to replace him – although he faces stiff competition from the Bank’s own deputy governor, Paul Tucker.
Addressing the Mansion House annual banquet last night, Turner repeated his admission that he had been wrong to back the euro in the past, yet talked up his role in responding to the global financial crisis since joining the Financial Services Authority (FSA) in 2008.
“My time at the FSA started amid crisis,” Turner told the Lord Mayor and his guests, noting that he took over the week after the collapse of Lehman Brothers. “It felt like being appointed captain of the Titanic after we’d hit the iceberg but before we’d actually sunk.”
With the Bank assuming sweeping new regulatory powers over the City, Turner stressed his involvement in developing post-crisis international rules. “We are now debating, in the international Financial Stability Board (FSB), the details of major reforms to counter the risks created by the complex network of institutions and activities which we label shadow banking… – a reform package which we will present for endorsement by G20 leaders in November.”
Turner is chairman of the FSB standing committee on supervisory and regulatory cooperation, and due to move on from the FSA when it disbands next year. Last night Turner praised the scheme to replace it with a Prudential Regulation Authority, under the Bank of England’s control, and a standalone Financial Conduct Authority.
He also backed even more “innovative and unconventional” forms of monetary stimulus, saying that the current form of quantitative easing “may be subject to declining marginal impact”.
The new authorities should have responsibility not only to ensure stability, but also to promote economic growth, he said, warning against “the stability of the graveyard” – a phrase coined by chancellor George Osborne.