Brown admits ‘mistake’ on banks

Gordon Brown said he had to accept responsibility for his part in the banking collapse

Gordon Brown has admitted he made a “big mistake” over the handling of financial regulation in the run-up to the UK’s banking crisis of 2008.

The former prime minister told a US conference he had not realised the “entanglements” of global institutions.

He said: “We set up the FSA believing the problem would come from the failure of an individual institution. That was the big mistake.

“We didn’t understand just how entangled things were.”

Mr Brown said he had to “accept my responsibility” but added he was not the only one who had made mistakes.

Mr Brown told the Institute for New Economic Thinking in Bretton Woods, New Hampshire, that he had been under “relentless pressure” from the City not to over-regulate.

“We know in retrospect what we missed. We set up the Financial Services Authority (FSA) believing that the problem would come from the failure of an individual institution,” he said.

“So we created a monitoring system which was looking at individual institutions. That was the big mistake.

“We didn’t understand how risk was spread across the system, we didn’t understand the entanglements of different institutions with the other and we didn’t understand even though we talked about it just how global things were, including a shadow banking system as well as a banking system.

“That was our mistake, but I’m afraid it was a mistake made by just about everybody who was in the regulatory business.”

Mr Brown said the banking meltdown had forced a rethink of financial regulation “in its entirety”.

“I have got to accept my responsibility and I do, and I have been very open about saying we made mistakes on that,” he said.

“But in a world where the understanding of what global meant was incomplete, I think many writers as well as many regulators made exactly the same mistake.”

The FSA, which Mr Brown established on his first day as chancellor in 1997, was widely criticised for its part in the banking collapse.

The chancellor, George Osborne, has announced plans to break up the FSA and hand more regulatory power to the Bank of England.

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