No amount of financial regulation can save the banking industry from itself if the people in it are fundamentally greedy and self-interested, Mark Carney told a room full of millionaires Tuesday.
Carney, the Canadian-born former head of the Bank of Canada who's now heading up the Bank of England, made the remarks at conference in London attended by money managers in charge of $30 trillion — a third of the investable money on the planet.
Carney is generally heralded for his stewardship of Canadian monetary policy in the lead-up to the global recession of 2008 and afterwards. His speech to the London audience on Tuesday was at once a recap of all the measures that financial regulators have taken ever since then to rein in the more egregious excesses of the financial world, but also a plea for bankers to recognize that ultimately the global economy is in their hands.
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"Integrity can't be bought and it can't be regulated," Carney said to an audience that included former U.S. president Bill Clinton, IMF head Christine Lagarde and the Prince of Wales.
The global recession that began in 2008 was born out of a financial crisis that preceded it, which was itself caused by international banks suddenly realizing they were invested in murky, shoddy assets, and they didn't have enough actual capital to cover their sudden, mounting losses.
Although co-ordinated international efforts seem to have managed to bring the global economy back from the brink of collapse, there's a palpable sense among regular people that the financial industry hasn't learned from its mistakes — nor did it ever really pay for them.
"Major banks were too big to fail operating in a privileged 'heads-I-win-tails-you-lose' bubble," said Carney, who also heads up the international Financial Stability Board, in addition to his duties at London's central bank. "Bankers made big sums in the run-up, they were well compensated after the hit and taxpayers picked up the tab for the failure."
Carney outlined a number of steps that international regulators have taken to beef up their oversight, including a cap on bonuses in several countries, demands to increase capital ratio reserves, and broad limitations on what types of businesses, exactly, banks are even allowed to meddle in. But ultimately, those who work in the financial industry must know they are responsible for the damage that can be caused by any immoral or illegal actions.
He said the excesses revealed in the downturn exacerbated economic factors such as inequality and GDP growth. But they had a more important "corrosive" impact on what he called the "social fabric" too.
"Individual firms must have a sense of their duty to the broader system," Carney said in his 20-minute speech, which was followed by a brief question and answer session.
The crux of Carney's argument has been said before — most frequently by Wall St. critics who note that none of the executives at major banks who lost billions of dollars and started off the crisis have ever been prosecuted for any crimes.
But Tuesday's event was unique in that it was one of the first time the financial world was voluntarily meeting to acknowledge the fact that their actions can have drastic if unintended consequences.
"Finance has to be trusted," Carney said. "There needs to be a sense of society."