Bank reforms must not fail – King

Mervyn KingMervyn King suggests banks have not learnt from the financial crisis

Failure to push through reforms of the banking sector could lead to another financial crisis, Bank of England governor Mervyn King has warned.

Mr King told the Daily Telegraph banks were focusing on short-term profits at the expense of their customers.

He also questioned their insistence on paying bonuses to staff.

BBC chief economics correspondent Hugh Pym said his comments were significant because the Bank of England was about to take over banking regulation.

Mr King’s remarks come weeks after Chancellor George Osborne signed Project Merlin.

Our correspondent said that under Project Merlin it was agreed that in return for lending more money and showing restraint on bonuses the government would not take any more action on pay and profits.

Mr King said over the past two decades too many people in financial services had thought “if it’s possible to make money out of gullible or unsuspecting customers that’s perfectly acceptable”.

“I wish I’d spoken out more forcefully about the build-up of leverage”

Mervyn King Governor of the Bank of England

He said: “Why do banks in general want to pay bonuses? It’s because they live in a ‘too big to fail’ world in which the state will bail them out on the downside.”

Mr King said: “We’ve not yet solved the ‘too big to fail’ or, as I prefer to call it, the ‘too important to fail’ problem.

“The concept of being too important to fail should have no place in a market economy.”

A former economics professor at Cambridge, Harvard and the London School of Economics, Mr King joined the Bank of England in 1991.

Mr King also said there was “too much weight put on the importance and value of takeovers” and that “it doesn’t make sense to destroy a company with reputation” in the hunt for short-term profits.

He also drew a contrast between manufacturing companies, which largely care about their workforces, customers and products, and the banks.

“There’s a different attitude towards customers. Small and medium firms really notice this: they miss the people they know,” he said.

In the interview he also reflected on the 2008 banking crisis.

He said the Northern Rock crisis could have been avoided if Britain had had a “statutory resolution process”.

He said: “We had been war-gaming one but the legislation wasn’t ready.

“If we had not stepped in for RBS and HBOS all the British banks would have suffered runs. They didn’t understand the nature of the risks they were taking.”

He admits to feeling some guilt about the crisis, saying: “I wish I’d spoken out more forcefully about the build-up of leverage.”

This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.

China premier targets ‘stability’

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China must ensure social stability by reducing inflation and corruption, Premier Wen Jiabao is telling the parliament’s annual session.

Mr Wen is addressing about 3,000 delegates to open the National People’s Congress in Beijing.

According to the released text of Mr Wen’s speech, the government aims to keep inflation to within 4% and hit economic growth of 8%.

Mr Wen says he accepts uneven economic development is a “serious problem”.

This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.

Hope for early bowel cancer test

Cancer cellA test to detect the early stages of bowel cancer could be one step closer
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Scientists have discovered what could be the first step towards a DNA test to detect the early signs of bowel cancer.

Tests on two distinct genes were highly accurate in distinguishing between tumours and benign polyps – growths in the bowel that can become cancerous.

While not all polyps in the bowel become cancerous it is thought almost all bowel cancers develop from polyps.

The Cambridge study, in the BMJ Journal Gut, analysed 261 samples from patients with benign polyps or bowel cancer.

In particular it looked at what are called DNA methylation patterns – a key process in cell development.

The researchers at Cancer UK’s Cambridge Research Institute at Cambridge University say that DNA methylation is essential for life.

“This first step in detecting molecular ‘flags’ for bowel cancer, could, one day, lead to a simple test to search DNA for the early signs of the disease”

Dr Ashraf Ibrahim Cambridge Research Institute

In healthy cells a compound called a methyl group is tagged to DNA where it acts as a “red light”, preventing certain genes from producing proteins.

But this process can go wrong in cancer cells and DNA methylation can also contribute to the cause and development of cancer by blocking important “protective genes”

Dr Ashraf Ibrahim, the lead author of the study, says studying molecular changes could make diagnosing bowel cancer much simpler in the future.

“The molecular signals, which tell genes whether to make proteins or not, can become jumbled in cancer cells. We’ve identified several places where this signal becomes damaged and shown this is linked to bowel cancer development.

“The majority of bowel cancers develop from benign polyps that turn cancerous – and this crucial research deepens our understanding of the molecular changes behind this development.

“This first step in detecting molecular ‘flags’ for bowel cancer, could, one day, lead to a simple test to search DNA for the early signs of the disease.”

Dr Lesley Walker, Cancer Research UK’s director of cancer information, says the research opens up the possibility of much earlier diagnosis of bowel cancer, when it is easier to treat.

“We’ve come a long way in improving screening and developing better treatments – our scientists have been involved in testing many drugs that are used to treat bowel cancer and they’ve had a key role in pinning down the genetic causes of the disease.

“But there is still more to be done. Research like this is vital in our goal to develop the best methods to detect, monitor and treat cancer and improve survival.”

More than 38,000 people in the UK are diagnosed with the disease each year.

This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.