Turner urges credit expansion control

"I am more and more convinced that we need to control the expansion of credit, independently of monetary policy," he said in France's La Tribune newspaper.

He praised China, Germany and Italy for successfully limiting the expansion of the wrong sorts of credit.

Turner, who last year said parts of London's financial district were "socially useless," said there was no reason to try and limit credit that financed real economic activity.

But he said other credit that used high debt levels for buying back existing assets or leveraged buyouts "are not always socially useful and can even be dangerous."

"And when we raise interest rates, we penalise both types without differentiating, we even hit real activity at the same time as we compensate speculators," he said.

"Tightening monetary policy translates often into a stronger exchange rate which increases the value. We have not thought enough about that, notably in Britain, mainly due to prevailing ideology which was against such a distinction," he said.

Turner also shrugged off calls from President Nicolas Sarkozy for a new world monetary order to resolve the problem of currency instability.

"It's very difficult to control exchange rates when capital moves freely," Turner said.

"And I am not convinced that the movements between the dollar and the euro are the main problem of the world economy.