TOP regulator Lord Turner yesterday said he would consider running for governor at the Bank of England, confirming his position as one of the favourites to take the role when Sir Mervyn King’s term ends at the end of June next year.
In a wide ranging speech and interview the Financial Services Authority (FSA) boss blamed free current accounts for the lack of competition in the banking sector and said the popular service may appear good for customers but simply pushes up costs for other products.
He also told a Bloomberg audience that they should “not demonise banks as the source of all our economic problems,” but instead recognise that banks face their own external constraints such as the high cost of funding, which has hit borrowing levels.
“I would obviously not rule myself out,” Turner said when asked about taking over at the Bank of England. “It is something I’ll have to think about when the time comes.”
Other lead contenders for the top job include former civil service boss Sir Gus O’Donnell and Bank deputy governor Paul Tucker.
And Turner stressed the importance of prudential regulation to promote financial stability – something the Bank of England will soon have responsibility for.
But he argued that regulators should not be given too many roles.
“I do not believe it is the role of the regulator itself to have responsibility to promote the competitiveness of the City, because the moment you introduce that requirement, you create a confusion of objectives and open the door to regulatory arbitrage,” he explained.
He ended by arguing that banks may be stuck in a damaging tradition by offering free current account services, hitting competition in the sector.
That “means that it may be difficult for a new entrant to make a business plan stack up unless they assume the sale in some future year of high margin ancillary products,” he said.
And that pressure to make money elsewhere means “many who stay in credit get a good deal, subsidised by others who pay through, for instance, unauthorised overdraft charges and PPI insurance premiums”. This is “not a sound basis for a long-term trust-based relationship between a competitive banking system and its customers”, he said.