Darling in sharp warning to bankers

Jun 17 2009

Chancellor Alistair Darling is to deliver a warning to Britain's leading bankers that they must abandon the pursuit of easy, short-term profits in favour of long-term wealth creation.

In his annual Mansion House speech to the City, Mr Darling will say that the process of learning lessons from the financial crisis must begin in the boardrooms of the banks themselves.

With the Treasury due to publish its proposals for reforming the system of financial regulation, he will say that it needs to be strengthened at both the national and international level.

"Having stabilised the banking sector, we are faced with the challenge of building a stronger, more efficient and more resilient financial sector in the future," he will say, according to advance extracts of his speech released by the Treasury.

"Because anyone who thinks that we can carry on as if nothing has happened should think again. In every country we are paying a huge price for this crisis. Not just the financial cost, but also a profound social and human cost."

With the system of huge City bonuses widely blamed for many of the excesses which led to the crisis, he will stress that change must start within the banks, ensuring that they have the right incentives in place.

"I strongly believe that the process of learning lessons has to start in the boardroom," he will say.

"Bank boards must have the right people, skills and experience to manage themselves effectively... Their focus must be long-term wealth creation, not short-term profits."

While Mr Darling will acknowledge that the banks need to continue to innovate, he will say that it must not be at the expense of proper scrutiny of the sort of complex financial instruments which led to many of their losses.

The Chancellor will argue that the global nature of the crisis had underlined the need for stronger international co-operation by financial regulators around the world, while not diminishing the importance of national bodies.