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Mervyn King backs radical changes in UK banking sector

Mervyn King, the Gov of the Bank of England, has today come out in support of Pres Obama's drastic move to control and restrict the power and growth in the worldwide banking sector. He believes that the UK needs a "safer and more robust banking system" and believes Pres Obama's move will prompt a wider debate about the pros and cons of the worldwide financial sector.

If we take a step back to when the recession began, i.e. the credit crunch, we can trace the initial problems back to the banking system and investment arena. Too many bankers and too many investors took risks as asset values pushed ahead to levels which were unsustainable in the medium to longer term. However, the most alarming fact that arose when the system collapsed was the fact that some banking and financial institutions only then began to understand the complex financial instruments in which they had invested, as they literally collapsed overnight!

In hindsight there were many signs that problems were building up for the future with investors and banking institutions pouring money into more complex financial instruments. It soon became apparent after the credit crunch began that many of these financial instruments were part of a domino trail and when one collapsed the rest followed very quickly.

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