Chairman of Santander UK visits Exeter
On 26 Oct 2011, Lord Burns, chairman of Santander UK, delivered a speech entitled “Is it all the fault of the Bankers?” for the Exeter College Seminar for Macroeconomics, which is generously sponsored by Santander.
Lord Burns brought a banker’s perspective on the causes of the recent crisis. He argued that the widespread use of financial innovations was rooted in a belief that better financial engineering can redistribute risk and make the system safer in a way not previously possible. The behaviour of rating agencies also played a role. Lord Burns described how lack of financial regulation combined with competitive pressure to push traditional banks into off balance-sheet activities in new financial products.
Eventually, banks ran into problems and their exposure to these products made their positions highly correlated. This accelerated the pace and magnitude of the downfall.
Lord Burns described how bank shareholders and senior bankers had lost huge sums as a consequence of the crisis, a fact not always widely appreciated by the general public. He expressed support for the recommendations contained in the report of the Vickers Commission, but was concerned that the reform of the banking sector may be proceeding too quickly, arguing that there will inevitably be knock-on effects on the economy if banks have to adjust and adapt too quickly.
The talk was well received, with the candour of Lord Burns appreciated by all.