UK Government

HM Treasury: Speech by the Financial Services Secretary, Paul Myners, opening comments to News Statesman event "What next for UK banking ?", Porticullis House, Westminster Monday 14 December 2009

News   •   Dec 14, 2009 10:41 GMT

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Good morning everyone and thank you to the New Statesman for organising this event.

We are here to talk about the future of British banking. This morning my fellow panellists and I will have an opportunity to delve into some of the detail on the significant changes that are taking place in the industry.

Over the past year there has been certainly been plenty of attention given to looking backward - and with good reason. In October 2008, our banking system failed sending our economy into recession. The cost in lost jobs and lost wealth has been great.

In that context, it is right that the public, the media, the Government and the industry has undertaken a vigorous public debate on the causes of the crisis. And in the process there has been anger from all quarters.

Taxpayers have been justifiably angry to see their money spent rescuing institutions that got rich by taking reckless gambles, drawing on an implicit and uncharged for public guarantee.

The Government, including myself, have at times been frustrated with the level of resistance to reform we have seen from the industry.

And bankers, the vast majority of whom were not to blame for the recklessness of a few of their peers, have been saddened as the reputation of their profession has been tarnished seemingly beyond repair.

This anger and this frustration is not surprising. But we should not underestimate its ability to distract us from the task at hand.

We must turn this in to something constructive.

Collectively, as Government and as an industry, we must work to rebuild a safe, sound and responsible sector that will drive economic growth and jobs, free from taxpayer support.

The Government has a very busy regulatory reform agenda to implement, domestically through the Financial Services Bill, in Europe and with G20 partners.

Banks themselves are rebuilding their capital bases and restructuring their businesses. The need to improve the quantity and quality of bank capital to protect depositors, the system, and taxpayers is an absolute priority.

Businesses and workers have a pressing interest in seeing new drivers of growth get the finance they need.

Shareholders - the ultimate owners of banks - have, in the form of Walker, a manifesto for engagement and stewardship. Our banks should not be ‘ownerless corporations’.

We make no apology for the tough action we've taken - to end a culture of risk-taking and excessive rewards that damaged our banking system, and undermined its vital role as a provider of credit to businesses and households.

But it is time for our discussions to focus on the future of finance. As we build a new relationship between banks and society

I know that's something banks want to support - a discussion that is more constructive, more practical, and more genuinely focused on ambition for the future and not anger about the past.

Of course there will be some difficult challenges ahead, including over bonuses, but I am confident these can be addressed successfully with common sense and a regard for fairness and equity. And just briefly on the issue of bonuses, it is worth reminding everyone that complaints from well paid City workers about the Government’s bonus tax are really directed at employers, not the Treasury. It is a matter for bank boards and shareholders, not the Government, to decide if bonus payments will be cut - the economics of the decision may have changed, but the choice still remains.

We mustn't forget what we are striving for here - soundly managed banks and markets that support and enhance the generation of wealth in our economy.

This will in turn support lending to businesses, opportunities for home-owners, and security to savers; a banking that is economically and socially useful.

A prosperous, sound, responsible banking system is an international asset that we want to promote and need to succeed.

A vibrant banking sector will be source for economic growth.

We must learn the lessons of the past decade to rebuild a sector that can innovate successfully, manage risk appropriately and create long-term prosperity.

I am confident that this can be done.

I look forward to that discussion starting this morning.

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