Bank of England’s regulatory tweaks to be norm says Haldane
THE WORLD faces more business cycles in financial services, not fewer, meaning the Bank of England could have to become more involved in the market, its new chief economist Andy Haldane warned yesterday.
As banks have shrunk, much of their work has moved to pension funds, insurers and mutual funds, which Haldane believes may mean more and possibly deeper cycles in future.
“These cyclical fluctuations could in turn be transmitted to, and mirrored, in greater cyclical instabilities in the wider economy,” he wrote in an article for the Central Banking Journal yesterday.
“It is likely that regulatory policy would need to be in a constant state of alert for risks emerging in the financial shadows, which could trip up regulators and the financial system. In other words, regulatory fine-tuning could become the rule, not the exception.”
Haldane said the vast scale of assets built up in investment funds and insurance companies posed a problem. He remained confident the banking reforms could reduce the likelihood of a crash such as the credit crunch happening again.