Bank of England chief economist says scars of financial crisis may never heal
Andy Haldane said the 2008 financial crisis was “hugely trust-busting” for those involved in money and finance.
The Bank of England may never be able to regain the trust it lost during the financial crisis, its chief economist has admitted.
Andy Haldane – who also sits on the Bank’s interest rate-setting Monetary Policy Committee – said the 2008 financial crisis was “hugely trust-busting” for those involved in money and finance, including the Bank of England.
“Even as the scars of the crisis heal, this trust deficit might not repair itself naturally,” he said during a question and answer panel hosted by the Royal Society of Arts in London.
“In other words, the trust deficit that those in money and finance face may be not cyclical, not temporary, but structural and permanent.
“And if that’s true, and it strikes me as plausible – more than plausible – then those of us within financial services, including central banks, will have to really go some to repair that deficit.”
Bank of England policymakers have been making efforts to engage with a wider UK audience in recent months as part of a bid to regain public confidence, in light of the fact that the financial sector has “historically done a very poor job” of explaining what it does and who it exists to serve, Mr Haldane said.
What is the biggest misconception about the Bank of England? Half think we're politicians and the other half think we're Barclays! @rachelbotsman quizzes Andy Haldane #RSATrust pic.twitter.com/YsUp7LBxNU— RSA Events (@RSAEvents) October 6, 2017
However, the chief economist said institutions such as the Bank of England were still in some cases justified in keeping some information from the public.
“It is not always in every way the case that greater openness and transparency are a good thing,” Mr Haldane said.
“Had we been fully open and fully transparent about what was going on during the financial crisis, It would, let me tell you, have been a lot lot worse.
“That would have been shouting fire in the theatre and however bad it was, it would have caused… an even greater haemorrhaging in confidence, and even greater collateral damage for savers and borrowers than we even saw.”
But at its core, money and finance is about promises built on “nothing more and nothing less than trust”, he stressed.
“When that trust goes south, money and finance collapses. In some ways, the loss of trust is the very definition of a financial crisis, the likes of which we’ve seen for at least eight centuries and counting.”