UK minister calls for 'moral reform' of banking

The UK's City minister today called for a "moral reform" of the British banking sector after losing the trust of public in the wake of the financial crisis.

Paul Myners said the meltdown exposed a "fundamental imbalance" between the power and accountability of banks and said the sector should follow the "values and ethics of wider society".

Speaking at the Financial Times Global Finance Forum, he also launched a fierce attack on bumper pay packages, and warned actions judged as reckless on the high street "must not be rationalised as acceptable on the trading floors of the City".

He said: "Corporate leaders in the global financial sector have begun to talk about addressing moral failures and that is to be welcomed.

"But it's time to move beyond soundbites and to start hearing how they intend to drive moral reform within their institutions."

"The banks need to understand that they have lost the trust of the public, and need to change their behaviours and values in order to earn forgiveness."

The minister criticised the huge payouts made in the sector, warning that "change is coming".

He said the huge salaries and bonuses on offer to bankers reflected an "ironic" deficiency in labour markets in the heart of the City.

"Derivative traders are not footballers with unique talents, and should not be paid as though they are," he added.

Financial sector woes of the past two years have spread into the wider economy culminating in the worst UK recession since the early 1980s.

The minister warned that banks in future would not be allowed to over-extend themselves only for the risk of a possible collapse to be borne by the British government.

Banks will be forced to make and maintain 'living wills' allowing them to be wound down in the event of a crisis.

These proposals have been attacked as expensive and time-consuming, but the minister said the cost of the plans would "pale in comparison to the costs faced by the taxpayer in rescuing the sector".