Bankers told to own up to rip-offs and rebuild trust

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The Independent Online

Senior policymakers told the banks to put their house in order yesterday to restore public trust in their battered reputations. Top politicians and regulators told an audience of senior bankers to stop complaining and accept responsibility for reckless behaviour and ripping off customers.

Paul Tucker, a deputy governor of the Bank of England, urged the banks to use their profits to strengthen capital buffers in a dangerous environment. He said "Our belief is that they should take more of these profits to build up capital against the threats we can do nothing ourselves to cure."

Mr Tucker told the British Bankers' Association conference the environment was "sufficiently threatening" that banks must "get ahead of the game". UK banks have moved back into profit and have shelled out billions in bonuses but there are mounting fears a sovereign debt default could trigger another credit crisis.

The deputy governor also called for a "new social contract" between the banks and the public to restore the balance between the guarantees offered by the public in return for banks lending out their money.

Andrew Tyrie, the chairman of the Treasury Select Committee, called on the banks to disclose their submissions to the Independent Commission on Banking over ringfencing of retail and investment banking.

Mark Hoban, the financial secretary to the Treasury, meanwhile told the banks to stop complaining about new capital rules. In a significant comment, he said the Government intended to ringfence retail and investment banking activities but that it would also look at imposing "operational subsidiarisation" so that key functions such as payments are split off if a bank fails.

Hector Sants, the chief executive of the Financial Services Authority, again scolded banks for fighting the watchdog's ruling on compensating people who had been missold payment protection insurance (PPI).

Marcus Agius, the chairman of Barclays and the BBA, apologised over PPI but warned that tough capital requirements could prompt banks to increase lending costs to get "a fair return". "More capital may reduce the probability of a bank failing but it can never reduce this probability to zero. And talk of bank investors being prepared to accept utility-type returns is completely unrealistic," he said.