Mark Carney: finance that becomes disconnected from the economy is ‘useless’

Bank of England governor Mark Carney has said the big banks have to change their culture in order to play a more socially and economically useful role.

Speaking to BBC Radio 4’s Today programme on Thursday – a day after the Bank said interest rates would remain low until employment had dropped to 7% – he said, “I think finance can absolutely play a socially useful and an economically useful function but what it needs in order to do so, the focus has to be, of the financier, the people working in the banking system, has to be on the real economy, what it does for businesses making investment, what ultimately it means for jobs in the economy.”

He added, “It’s the loss of that focus; it’s finance that becomes disconnected from the economy, from society, finance that only talks to itself and deals with each other that becomes socially useless.”

Click here to read The Guide to Sustainable Banking 2012

The culture of banking is something that Carney spoke strongly about in his previous role as governor of the Bank of Canada. In a speech in Ontario from February, made just over fourth months before taking over from Sir Mervyn King at Threadneedle Street, he spoke about “[promoting] a culture of ethical business”.

He told the Today programme that banks “absolutely” shouldn’t sell products that customers might not necessarily need, like payment protection insurance, which the high street banks have been fined more than £18 billion for in total since the mis-selling began.

“Let me be absolutely clear as well, the type of behaviour you’re talking about is conduct behaviour. Actually Martin Wheatley who’s in charge of the Financial Conduct Authority is directly responsible for that”, Carney said.

“But let me say as governor of the Bank of England, and this is something that is shared by my colleagues, it’s that attitude which indicates even if we’re not directly responsible for that behaviour, it’s that attitude in institutions that undercuts their effectiveness, is bad for the system, and to the extent that with our powers we can use them, we work to snuff them out.”

One of the first big decisions Carney made after taking over from King on July 1 was to confirm that Jane Austen would be replacing Charles Darwin as the face of the British £10 notes from 2017. This announcement came shortly after campaigners had delivered 30,000 signatures to the Bank, belonging to people who objected to Elizabeth Fry – the only female on British banknotes currently – being replaced from 2016.

The Today programme questioned Carney on why no women sat on the Monetary Policy Committee (MPC), which the governor described as “anomalous”.

He added, “It’s striking on a personal level. It’s the responsibility obviously of the government to select the candidates.

“What we can and have to do at the Bank of England is grow top female economists all the way through the ranks so that that adds to the diversity and macroeconomic thinking, [and] it adds to qualified candidates for the MPC as well as qualified candidates to be a future governor.”

Further reading:

Mark Carney must lead Bank of England down a sustainable path

Millionaire entrepreneur calls for ‘growth over greed’ in banking

‘Shocking and widespread malpractice’ should land bankers in jail, says commission

Big five’s banking monopoly at risk, with 2.4m closing accounts in 2012

The Guide to Sustainable Banking 2012