Pre-Budget Report

The Government have taken some action, but the issue is complex nationally and internationally. We see that from the tax on bank bonuses, whereby we have had a kick-back from the City, because some companies have said that they want to relocate. However, there is an international dimension, too. Given that we exist in a globalised world, we need to fix the matter globally, and that is a very difficult job. Like the Treasury Committee, others have taken to the stage and commented for a considerable period. For example, the Governor of the Bank of England, who has appeared before our Committee, has been explicit on the issue. When we visited America, we met Paul Volcker, a former chairman of the Federal Reserve, who said that there was an issue that needed to be tackled. Indeed, he went further than any of us by saying that he wanted sound evidence from the banking sector that any financial innovation in the past 20 years had led to economic growth. The only financial innovation for which he gives the banking system credit is the ATM. There is deep scepticism. Nicholas Brady, a former US Treasury Secretary under Ronald Reagan, had an article in the Financial Times this week, in which he said explicitly that the "banking system is unsound." Core reforms are essential if we are to provide the system with safety and soundness. People want safe deposits. One of the hardest questions that I asked the bank chief executives when they appeared before the Committee was, "Do you agree with the 'Oxford English Dictionary' definition of a bank, which is an institution for the safe keeping of people's money? If you do, you have screwed up." That is the issue: the consumer wants trust and confidence in the banking system to be restored.