Regulators should direct credit, says Adair Turner

POLICYMAKERS may have to decide how much and to whom banks should lend, in the interest of financial stability, Adair Turner, chairman of the Financial Services Authority (FSA) said in a speech last night.

Leaving the market to decide how to allocate credit can result in booms and busts, he told a conference on banking and the economy at Southampton University.

“We may need to get far more involved in the details of credit capacity within the economy and even of the sectoral allocation of credit than we have for several decades,” Turner said.

Turner (pictured left) questioned “the extent to which private credit creation processes can be relied upon to be socially optimal” and declared himself “not very confident” that the market could perform well without his “judgements about the economic value of different categories of credit.”