By . Becky Barrow . PUBLISHED: . 17:19 EST, 2 May 2012 . | . UPDATED: . 06:49 EST, 3 May 2012 . The Bank of England governor sensationally admitted last night that he failed in his duty to help prevent 'the worst recession since the 1930s' and the implosion of the British banking system. In a landmark speech, Sir Mervyn King said: 'So why, you might ask, did the Bank of England not do more to prevent the disaster? We should have.' He admitted he bitterly regrets that he and his colleagues did not 'shout from the rooftops' about the impending financial disaster – which continues to have crippling consequences for millions. Limited powers: Bank of England Governor Mervyn King (second from right) in Washington on April 21 . In the first radio broadcast by a Bank governor for more than 70 years, Sir Mervyn said he had not been 'blind to what was going on' in the run-up to the crisis, but failed to stop it. After reminding listeners the Bank was stripped of its power to regulate banks when Labour came to power in 1997, he said: 'Our power was limited to that of publishing reports and preaching sermons. 'And we did preach sermons about the risks. But we didn't imagine the scale of the disaster that would occur. 'With the benefit of hindsight, we should have shouted from the rooftops that a system had been built in which banks were too important to fail, that banks had grown too quickly and borrowed too much, and that so-called light-touch regulation hadn't prevented any of this.' Sir Mervyn, who was giving this year's BBC Today Programme Lecture last night, expressed deep sympathy for victims of the crisis. He said the number of people searching for work has rocketed by 'over a million' in Britain to 2.65million. 'To many of you, this will seem deeply unfair,' he said. 'And it is.' Sir Mervyn also attacked some bankers, . who continue to take bonuses while their firms' share price collapses . and dividends are scrapped or slashed. Nearly . £1,000billion of taxpayers' money was used to prop up the banking . system at the worst point of the crisis. Though some institutions fell, . he said 'almost all banks would have failed had not taxpayer support . been extended'. He quoted . the Queen, who asked a professor at the London School of Economics: 'Why . did no one see this coming?' Sir Mervyn said the answer was 'extremely . simple', adding: 'No one believed it could happen. There was a failure . of imagination to appreciate the scale of the fragilities and their . potential consequences.' Failed: The Bank of England and The Royal Exchange, in Threadneedle Street, London . 'No one could quite bring themselves to believe that in our modern financial system the biggest banks in the world could fall over. But they did.' In an interview on BBC Radio 4's Today programme this morning, Sir Mervyn reinforced his protests that the Bank of England should not accept sole blame for the crisis and that it was a collective failure of a flawed system. He said: 'My main point was not to try and blame anyone. This wasn’t the fault of a few bankers, a few politicians or even a few central banks. This was a failure of a system and I accept our share of responsibility in going along with a system of banking that failed.' He added that reform of regulation and the separation of powers away from one single body was key to averting a similar banking collapse in the future. He said: 'One of the big lessons from the crisis was that the idea of concentrating all kinds of regulation in one regulator didn’t work. And for very good reason which was the people running it were continually under pressure from press, politicians… to focus on things like consumer protection – the Equitable Life crisis and so on. 'And I don’t think it makes sense to worry about the finances of banks in the same organisation as people are doing that kind of regulation. So it’s being separated. And I think that’s important. 'I don’t think any central bank or indeed any finance ministry or regulator feels that they’ve come out well from this because something very wrong happened that’s very clear. 'What we can do and the only thing we can do now is make sure we learn the lessons. And I think in Britain we’ve learned more lessons than most other countries.' Epicentre: Sir Mervyn said the banking crisis which rocked the City of London was the result of failings of bankers, politicians, and central banks . Sir Mervyn also used this follow up interview to his landmark speech to back the Government's ‘textbook response’ to the economic crisis - despite the UK's slide back into recession. He blamed the spike in food and energy prices for growth stalling but in a boost for Chancellor George Osborne insisted there were ‘signs of a recovery’. The UK suffered a shock return to recession after official figures showed the economy shrank in the first quarter of this year, following a contraction in the final three months of 2011. Labour has claimed it is a recession ‘made in Downing Street’, but Sir Mervyn backed the coalition's approach to tackling the budget deficit. ‘The strategy was that there would be a gradual move towards reducing the budget deficit over five years, that there would be an acceptance of the significant fall in sterling of 25per cent and there would be a rebalancing of the economy,’ he said. ‘We had to rebalance our economy because we had a trade deficit. So this was an absolutely textbook response to the situation. ‘If it had not been for the squeeze on real take-home pay being exacerbated by the rise in energy and food prices then I think we would have seen some growth.’ He said there was a ‘patchy picture’ around the country but ‘there are indeed signs of a recovery coming and we see that in the business surveys and I think also in the employment data’. ‘So I think a reasonable view would be that we would start to see steady, slow recovery coming during the course of the year.’ Flaws: Regulators failures to deal with the banking sector's increasingly risky deals helped cause the crash, the Bank of England Governor Sir Mervyn King said . Explaining his claim there had been no unsustainable boom he told Today: ‘The speed at which the economy as a whole was growing was sustainable and the proof of that was that unemployment was basically constant and that inflation was low and very stable. ‘So there was no sign that the economy was growing too quickly in total or too slowly. ‘What was unsustainable was the balance within it. I have talked many times over the previous 10 years about the fact that we were building up a trade deficit, that this was leading to higher levels of consumption than could be sustained and that at some point this would have to come to an end. ‘But this wasn't a problem that was unique to the UK, this was a reflection of what was going on in the world economy as a whole.’ The new powers being given to the Bank, with the creation of the Financial Policy Committee and the restoration of the responsibility for regulating the sector, would mean problems could be targeted more effectively, he told Today. He urged the Government to introduce the Independent Commission on Banking's proposals to ring-fence banks' investment banking activities from their high street arms. Sir Mervyn compared allowing the two to co-exist without some barrier between them to building 'nuclear power stations in densely populated areas'. Investment banking activities should be kept far away from customers' savings, current accounts and mortgages, he said. ■ Business leaders dashed hopes of quick recovery by predicting zero growth in the current April to June quarter of the year. However, the CBI forecast it would rise to 0.7 per cent in the third quarter followed by 0.5 per cent in the fourth quarter.
Bank of England governor said Labour stripped it of its power .
He said people looking for work has rocketed by 'more than a million'
Sir Mervyn blamed spike in energy and food prices for stalling recovery and pushing Britain back into recession .
Spiraling trade deficit and high levels of consumption were unsustainable during build up to crisis .
But Bank of England now better equipped with more powers to tackle trouble spots in economy before a crash .
By . Becky Barrow . PUBLISHED: . 17:19 EST, 2 May 2012 . | . UPDATED: . 06:49 EST, 3 May 2012 . The Bank of England governor sensationally admitted last night that he failed in his duty to help prevent 'the worst recession since the 1930s' and the implosion of the British banking system. In a landmark speech, Sir Mervyn King said: 'So why, you might ask, did the Bank of England not do more to prevent the disaster? We should have.' He admitted he bitterly regrets that he and his colleagues did not 'shout from the rooftops' about the impending financial disaster – which continues to have crippling consequences for millions. Limited powers: Bank of England Governor Mervyn King (second from right) in Washington on April 21 . In the first radio broadcast by a Bank governor for more than 70 years, Sir Mervyn said he had not been 'blind to what was going on' in the run-up to the crisis, but failed to stop it. After reminding listeners the Bank was stripped of its power to regulate banks when Labour came to power in 1997, he said: 'Our power was limited to that of publishing reports and preaching sermons. 'And we did preach sermons about the risks. But we didn't imagine the scale of the disaster that would occur. 'With the benefit of hindsight, we should have shouted from the rooftops that a system had been built in which banks were too important to fail, that banks had grown too quickly and borrowed too much, and that so-called light-touch regulation hadn't prevented any of this.' Sir Mervyn, who was giving this year's BBC Today Programme Lecture last night, expressed deep sympathy for victims of the crisis. He said the number of people searching for work has rocketed by 'over a million' in Britain to 2.65million. 'To many of you, this will seem deeply unfair,' he said. 'And it is.' Sir Mervyn also attacked some bankers, . who continue to take bonuses while their firms' share price collapses . and dividends are scrapped or slashed. Nearly . £1,000billion of taxpayers' money was used to prop up the banking . system at the worst point of the crisis. Though some institutions fell, . he said 'almost all banks would have failed had not taxpayer support . been extended'. He quoted . the Queen, who asked a professor at the London School of Economics: 'Why . did no one see this coming?' Sir Mervyn said the answer was 'extremely . simple', adding: 'No one believed it could happen. There was a failure . of imagination to appreciate the scale of the fragilities and their . potential consequences.' Failed: The Bank of England and The Royal Exchange, in Threadneedle Street, London . 'No one could quite bring themselves to believe that in our modern financial system the biggest banks in the world could fall over. But they did.' In an interview on BBC Radio 4's Today programme this morning, Sir Mervyn reinforced his protests that the Bank of England should not accept sole blame for the crisis and that it was a collective failure of a flawed system. He said: 'My main point was not to try and blame anyone. This wasn’t the fault of a few bankers, a few politicians or even a few central banks. This was a failure of a system and I accept our share of responsibility in going along with a system of banking that failed.' He added that reform of regulation and the separation of powers away from one single body was key to averting a similar banking collapse in the future. He said: 'One of the big lessons from the crisis was that the idea of concentrating all kinds of regulation in one regulator didn’t work. And for very good reason which was the people running it were continually under pressure from press, politicians… to focus on things like consumer protection – the Equitable Life crisis and so on. 'And I don’t think it makes sense to worry about the finances of banks in the same organisation as people are doing that kind of regulation. So it’s being separated. And I think that’s important. 'I don’t think any central bank or indeed any finance ministry or regulator feels that they’ve come out well from this because something very wrong happened that’s very clear. 'What we can do and the only thing we can do now is make sure we learn the lessons. And I think in Britain we’ve learned more lessons than most other countries.' Epicentre: Sir Mervyn said the banking crisis which rocked the City of London was the result of failings of bankers, politicians, and central banks . Sir Mervyn also used this follow up interview to his landmark speech to back the Government's ‘textbook response’ to the economic crisis - despite the UK's slide back into recession. He blamed the spike in food and energy prices for growth stalling but in a boost for Chancellor George Osborne insisted there were ‘signs of a recovery’. The UK suffered a shock return to recession after official figures showed the economy shrank in the first quarter of this year, following a contraction in the final three months of 2011. Labour has claimed it is a recession ‘made in Downing Street’, but Sir Mervyn backed the coalition's approach to tackling the budget deficit. ‘The strategy was that there would be a gradual move towards reducing the budget deficit over five years, that there would be an acceptance of the significant fall in sterling of 25per cent and there would be a rebalancing of the economy,’ he said. ‘We had to rebalance our economy because we had a trade deficit. So this was an absolutely textbook response to the situation. ‘If it had not been for the squeeze on real take-home pay being exacerbated by the rise in energy and food prices then I think we would have seen some growth.’ He said there was a ‘patchy picture’ around the country but ‘there are indeed signs of a recovery coming and we see that in the business surveys and I think also in the employment data’. ‘So I think a reasonable view would be that we would start to see steady, slow recovery coming during the course of the year.’ Flaws: Regulators failures to deal with the banking sector's increasingly risky deals helped cause the crash, the Bank of England Governor Sir Mervyn King said . Explaining his claim there had been no unsustainable boom he told Today: ‘The speed at which the economy as a whole was growing was sustainable and the proof of that was that unemployment was basically constant and that inflation was low and very stable. ‘So there was no sign that the economy was growing too quickly in total or too slowly. ‘What was unsustainable was the balance within it. I have talked many times over the previous 10 years about the fact that we were building up a trade deficit, that this was leading to higher levels of consumption than could be sustained and that at some point this would have to come to an end. ‘But this wasn't a problem that was unique to the UK, this was a reflection of what was going on in the world economy as a whole.’ The new powers being given to the Bank, with the creation of the Financial Policy Committee and the restoration of the responsibility for regulating the sector, would mean problems could be targeted more effectively, he told Today. He urged the Government to introduce the Independent Commission on Banking's proposals to ring-fence banks' investment banking activities from their high street arms. Sir Mervyn compared allowing the two to co-exist without some barrier between them to building 'nuclear power stations in densely populated areas'. Investment banking activities should be kept far away from customers' savings, current accounts and mortgages, he said. ■ Business leaders dashed hopes of quick recovery by predicting zero growth in the current April to June quarter of the year. However, the CBI forecast it would rise to 0.7 per cent in the third quarter followed by 0.5 per cent in the fourth quarter.
Bank of England governor sensationally admitted the Bank was stripped of its power to regulate victims of the crisis. He said the number of people searching for work has rocketed by 'over a UK's slide back into recession. He blamed the spike in food and energy prices for growth economy because we had a trade deficit. So this in energy and food prices then I think we would levels of consumption than could be sustained and high street arms. Sir Mervyn compared allowing