Govts have failed to tackle causes of the last major financial crash

LONDON: In this file photo, former British Prime Minister Gordon Brown addresses guests on the issues surrounding Brexit at a Fabian Society event in Westminster Cathedral Hall, London. —AFP

LONDON: Former British Prime Minister Gordon Brown warned that the world is on the verge of sleepwalking into another financial crisis because governments have failed to tackle the causes of the last major financial crash a decade ago.

Britain's leader when the collapse of the US investment bank Lehman Brothers triggered the worst financial crisis since the Great Depression said the world is leaderless and was now entering a period of vulnerability.

"We are in danger of sleepwalking into a future crisis," Brown, 67, told The Guardian. "There is going to have to be a severe awakening to the escalation of risks, but we are in a leaderless world."

Brown said the global economy had failed to introduce an early warning system and a way of monitoring financial flows so that it was possible to tell where money had been lent and on what terms. "We have dealt with the small things but not the big things," said Brown, who was British prime minister from 2007 to 2010.

Brown said action against financial wrongdoing had not been tough enough and that many banks would expect to be bailed out again in the event of a future crisis.

"The penalties for wrong-doing have not been increased sufficiently," he said. "The fear that bankers will be imprisoned for bad behavior is not there. There has not been a strong enough message sent out that government won't rescue institutions that haven't put their houses in order."

Brown said the international cooperation that helped tackle the global financial crisis ten years ago may not exist today because countries have become more protectionist.

"The cooperation that was seen in 2008 would not be possible in a post-2018 crisis both in terms of central banks and governments working together. We would have a blame-sharing exercise rather than solving the problem," he said. A spokeswoman for Prime Minister Theresa May disagreed with Brown's assessment and said Britain has built one of the most robust economies since 2008.

"We have reformed regulation to put in place one of the toughest systems in the world and we have made it easier to deal with any issues that emerge on the banking front," she added. - Reuters