The head of the International Monetary Fund has warned that a persistent violation of ethics among bankers and rising inequality pose a major threat to growth and financial stability.
Christine Lagarde told an audience in London that six years on from the deep financial crisis that engulfed the global economy, banks were resisting reform and still too focused on excessive risk taking to secure their bonuses at the expense of public trust.
She said: “The behaviour of the financial sector has not changed fundamentally in a number of dimensions since the crisis. While some changes in behaviour are taking place, these are not deep or broad enough. The industry still prizes short-term profit over long-term prudence, today’s bonus over tomorrow’s relationship.
“Some prominent firms have even been mired in scandals that violate the most basic ethical norms – Libor and foreign exchange rigging, money laundering, illegal foreclosure.”
Lagarde warned the too-big-to-fail problem among some of the world’s largest financial institutions was still unresolved and remained a major source of systematic risk, with implicit subsidies of $70bn (£42bn) in the US, and up to $300bn in the eurozone.
In a speech littered with quotations from Winston Churchill to Pope Francis and Oscar Wilde, Lagarde said international progress to reform the financial system was too slow.