King joined the Bank in March 1991 as chief economist and executive director, after being a
non-executive director from 1990 to 1991. He was appointed
Deputy Governor in 1997, taking post on 1 June 1998. In the same year, King became a member of the
Group of Thirty. An
ex-officio member of the Bank's interest-rate setting
Monetary Policy Committee since its inception in 1997, King took part in its monthly meetings. Succeeding
Sir Eddie George as Governor on 1 July 2003, he became the first incumbent Governor of the Bank of England to receive an
audience with
Queen Elizabeth II. While Governor, King was responsible for putting
Matthew Boulton and
James Watt on the
£50 note.
2008 financial crisis After becoming governor, King explained that
Bank of England policy was "similar to that of the Federal Reserve" under
Alan Greenspan. Greenspan described his approach as "mitigat[ing] the fallout [from the bursting of a bubble] when it occurs". King agreed with
Alan Greenspan that, "It is hard to identify asset price 'bubbles'." and the
OECD in 2005. King noted the "unusually large" difference between the
RPIX and
CPI at the beginning of 2004 (the latter does not include house prices as part of its inflation measure, whilst the former does), and, six months later, that UK house prices had risen "to levels which are well above what most people would regard as sustainable in the longer term", having increased by more than 20% over the preceding year and more than 100% over the preceding five. In 2005,
The Economist described the run-up in UK house prices as forming part of "the biggest bubble in history", and, by October 2007—when the UK housing bubble was at its peak — the IMF was reporting that the UK housing market was "overpriced by up to 40 per cent". As noted by the OECD, house-price volatility "can raise systemic risks as the banking and mortgage sectors are vulnerable to fluctuations in house prices due to their exposure to the housing market."
Dean Baker in
The American Prospect said the failure by Greenspan and King to tackle their respective countries' housing market bubbles resulted in catastrophic "fallout" when the bubbles burst, resulting in both countries'
worst recessions since the
Great Depression. UK–US inaction may be compared to action taken by China and Australia. Another result of the financial crisis was King's rejection of the Bank's devout focus on price stability, or
inflation targeting, a policy that was instituted after
Black Wednesday in 1992 and continued by King after becoming Governor in 2003. One of the two early lessons King drew from crisis were that "price stability does not guarantee stability of the economy as a whole" and that "the instruments used to pursue financial stability are in need of sharpening and refining." The 2012 Financial Services Bill, in transferring the majority of
macroprudential regulatory powers from the FSA to the Bank, granted the
Financial Policy Committee (chaired by the Governor) the power to curb lending in booms, including placing limits on the public's access to mortgages. A former senior BoE official summed up the Bank's pre-crisis performance: "How can you look back with the benefit of hindsight and see it as a success? We were responsible for financial stability and we utterly failed to take any avoiding action against the greatest financial crisis in our lifetimes". In its review of Bank of England accountability, one of the major complaints of the Treasury Select Committee was the Bank's refusal to undertake an internal review of its performance during the financial crisis. Such a review would pose difficulties since evidence on how its most senior policymakers arrived at their decisions was destroyed as a matter of course. As in the UK, the US central bank's failure led to a new regulatory framework, the 2010
Dodd–Frank Wall Street Reform and Consumer Protection Act. A 2012 review of actions taken by Western central banks in the face of the crisis also supported King's claim. The bank has faced criticism, however, for the pace of the rate cuts, which took five months from the beginning of October 2008 to get down from 5.0% to 0.5%, where they remained for several years. After becoming only the second Bank of England Governor to speak to the
TUC in its 142-year history, King conceded that people were "entitled to be angry" about unemployment and the bank bailout. King has been scathing about the banking sector since it crashed, especially its "breathtaking" £1 trillion bailout and its continuation of bonus awards in 2009, calling for a serious review of banking's structure and regulation. In a
Daily Telegraph interview in March 2011, King said banks had "put profits before people", that failure to reform the sector could result in another financial crisis, and that traditional manufacturing industries have a more "moral" way of operating. In an interview with
The Times in March 2012, he said that the banks are still in denial about the "very real and wholly understandable" anger that is felt at their behaviour, Bankers have not been happy with his excoriating views and insistence on avoiding
moral hazard, but King insists that "[m]arket discipline can't apply to everyone except banks", pinpointing the banks' sense of grievance on their finding it "very, very difficult to face up to the failure of their banking model". On 26 November 2012,
Mark Carney was named as King's successor.
Banks bailout King was accused of refusing funding to the
Northern Rock Bank, precipitating a run on that bank, a situation not seen in the UK since 1914. King later said that it had been the Chancellor
Alistair Darling, not he, who had the final word on refusing the necessary help to Northern Rock. In his review of King's tenure as Governor,
Times journalist David Wighton wrote: In his memoirs,
Alistair Darling was critical of King for emphasising
moral hazard—the doctrine of not saving the banks from the consequences of their own mistakes—instead of rescuing the banks by pumping money into them as the banking-system meltdown occurred in autumn 2008. Despite his refusal to give funding to the retail banks, he retained his job, and submitted in defence to a
Treasury Select Committee (New York Times/Financial Times, 20 September 2007) that his actions were on the basis that the
Bank of England was the "
lender of last resort" but subsequently supported moves to provide funding to those banks which had been nationalised or partly nationalised.
Political interventions King's highly-critical
Mansion House Speech in 2009 allegedly helped to bolster the Conservatives in the run-up to the
general election. King called for the break-up of the country's biggest banks, as well as arguing that, unless the Bank were given more active, interventionist powers to ensure financial stability, it would be like a church: able to "do no more than issue sermons or organise burials." In May 2010, just days after the Coalition government was formed, King said he had spoken to Chancellor George Osborne and supported his plans to cut spending by a further £6 billion within the 2010–11 fiscal year. In November 2010, it was revealed that some senior staff at the Bank of England (one of them was David Blanchflower) and of making "excessively political" interventions with regard to UK economic policy. As a result of the WikiLeaks disclosures and
David Laws' account of the Tory-Lib-Dem coalition-talks, King was asked by the
Political and Constitutional Reform Select Committee to explain why he was seemingly cited in the talks as backing Tory plans to introduce spending cuts this year. King insisted to the committee that "at no stage did I offer any advice on the composition of any measures designed to reduce the government deficit"; the committee implicitly accepted King's explanation of events as he is not even mentioned, let alone criticised, in their final report. According to
George Osborne,
Gus O'Donnell made an offer to have King brief the Tories and Lib Dems during the Coalition's formative talks; however, the parties suspected they "knew what he was going to say and . . . also thought it was more appropriate for our Treasury spokesmen to talk to him". King was criticised again in May 2012 on BBC Radio 4's Today programme, on the day before an election, after he expressed approval of Coalition austerity measures. In a speech to the European Parliament in Brussels in May 2011, King commented that the Bank of England was more concerned with the broader stability of the economy and banking sector than with inflation figures: "The economic consequences of high-level indebtedness now would become more severe if rates were to rise. It is the main reason why interest rates are so low." With regard to
Project Merlin, King was critical of Chancellor Osborne's misleading figures, and correctly predicted in a "light plausibility check" that Merlin would be a failure. In March 2009, King said any plan for a second
fiscal stimulus by the UK Government had to be done with caution. His Mansion House Speech in June 2009 criticised Chancellor
Alistair Darling for resisting significant changes to the allocation of regulatory responsibilities between the FSA, the Treasury and the Bank, which would have given the BoE greater power to fulfil its role of ensuring economic stability. In January 2012, King received a letter from the Government's former chief scientific adviser
Sir David King,
Zac Goldsmith, former environment minister
John Gummer (and 17 others) warning of the possibility of a
carbon bubble. King agreed to an evaluation of the matter. The BoE's Financial Policy Committee, established to identify emerging bubbles in the financial system, agreed in March 2012 to ask Parliament for new policy tools to be used to prevent another financial crisis. King said that the FPC narrowed its choice of instruments to three—the power to ensure banks have countercyclical capital buffers, the ability to force banks to hold more capital against exposure to specific sectors judged risky, and the power to set leverage ratios—because it will be important to explain to parliament and the wider public why it is or is not using them. Late March 2019, he argued that the UK should leave without a deal in the wake of the UK's
decision to leave the European Union, arguing that the economic consequences would be limited, and that the UK was well-prepared after six months of preparations. ==Personal life==