1. ITV Report

Sir Mervyn King warns against 'demonising' bankers

Sir Mervyn King, the outgoing governor of the Bank of England Photo: Philip Toscano/PA Wire

Sir Mervyn King has called for an end to bankers being "demonised" for their role in the financial crash, insisting the problem was with the system rather than individuals.

The outgoing governor of the Bank of England said there was a failure to adequately regulate the financial sector and society had given "too much status" to those in the City.

In an interview with the Murnaghan programme on Sky News, Sir Mervyn said bankers were only part of the problem which led to the meltdown in the financial services sector.

I would say to people, though, don't demonise individuals here. This wasn't a problem of individuals, this was a problem of a failure of a system.

He also warned that one of the government's plans to reboot the housing market, through its Help To Buy scheme, was unsustainable in the long run.

Read: No room for 'US-style guaranteed mortgages' says King

The governor said the financial crash was due to a failure in the system, not individuals Credit: Stefan Rousseau/PA Wire

In one of his last interviews before stepping down as governor, Sir Mervyn gave this assessment of the financial meltdown:

What bankers did was not the only explanation of the crisis that we had.

What we had was a world in which interest rates had become very low, investors of all kinds - not just banks - were desperately searching for ways in which they could earn more return, so they took big risks.

Those risks, some of them, went wrong.

Where the banks contributed to the problem was that they themselves had taken too many risks on their balance sheet and they simply didn't have enough capital to absorb the losses that were likely to come along.

People took fright, they lost confidence in the banks, they wouldn't provide money to the banks so the banks couldn't lend to businesses or households.

I would say to people, though, don't demonise individuals here. This wasn't a problem of individuals, this was a problem of a failure of a system.

We collectively allowed the banking system to become too big, we gave it far too much status and standing in society and we didn't regulate it adequately by ensuring that they had enough capital. We have to put that right.

– mervyn king
The outgoing governor warned that the Help To Buy scheme must not become permanent Credit: Rebekah Downes/PA Wire

But Sir Mervyn also raised concerns about one of the government's plans to stimulate a recovery, by boosting the housing market.

He warned that the Chancellor's Help to Buy scheme, which will see the Government guarantee up to 15% of a mortgage on properties worth up to £600,000.

The scheme, which starts in January 2014, is due to run for three years and Sir Mervyn warned it must not be allowed to become permanent.

I'm sure that there is no place in the long run for a scheme of this kind.

This scheme is a little too close for comfort to a general scheme to guarantee mortgages.

We had a very healthy mortgage market with competing lenders attracting borrowers before the crisis, and we need to get back to that healthy mortgage market.

We do not want what the United States have, which is a government-guaranteed mortgage market, and they are desperately trying to find a way out of that position.

– mervyn king

Sir Mervyn's concerns about Help to Buy echo those of the Treasury Select Committee, which reported on the Budget last month.

The committee warned the Government will come under "immense" pressure to extend Help to Buy in three years.