Financial sector 'needs more reform' says former Bank of England chief

The UK banking sector is not out of the woods yet, according to the man who steered it through the financial crisis.

The former governor of the Bank of England Sir Mervyn King has said the UK's banking sector might not be able to survive another major crisis in its current state.

Speaking to the BBC Radio 4 Today Programme, he warned: "I don't think we're yet at the point where we can be confident that the banking system would be entirely safe," adding: "I don't think we've really yet got to the heart of what went wrong."

He pinpointed global imbalances between different economies as being the key to the problem - and warned that even as the UK's economy has recovered, the situation remains too fragile to shift away from the policy of holding the base rate down at 0.5 per cent, where it has been since March 2009.

While noting that it would make little sense to try to maintain a low rate "indefinitely", he suggested a rise in the cost of borrowing "would probably lead to another downturn".

The words of warning suggest that those seeking jobs in the financial sector may find they need to be prepared to continue the work of implementing reform, as well as auditing the systems used by institutions to ensure they are as robust in the face of any problems that might arise as they can be.

Sir Mervyn's fears for the financial system come despite most major UK banks passing the 2014 stress tests organised by the Bank of England, based on their ability to deal with a severe downturn at least as bad - if not even worse - than that of 2008-09.

These included hypothetical plunges in the value of property and a huge surge in unemployment, but future stress tests may include additional criteria, ensuring internal audits will need to be rigorous across a wide range of areas.

Only the Co-operative Bank did not pass the stress tests this year, but this came as no surprise following previous warnings that it would not do so. The institution is now working on a restructuring programme to ensure it will be in a far more secure position in the future.