Alistair Darling: 'Banks must be the servants of the economy, not its masters'

Published on Friday 15 May 2009 13:31

In the past year the world's banking system has faced its worst crisis in several generations. A number of major institutions only remain standing today as a result of interventions from their governments.

Here in Scotland our financial sector has been hit particularly hard. Many people working in the industry have lost their jobs. Many more are understandably concerned about their future.

The steps taken in the UK and across the world to support the banks were necessary to protect the economy and to protect jobs and families.

But in the process there has rightly been anger in many quarters about the mistakes that led to the current crisis. And there has also been anger and disappointment as two of our major Scottish banks have been forced to seek emergency help to survive the crisis, while the Dunfermline Building Society has had to be sold.

I understand that anger and I share the disappointment of the public about what has happened. That is why our government is leading the international efforts to fix the global regulatory system to protect the economy in future from the sort of excessive risk taking that has done so much damage.

But I also understand that we need the banks.

Britain has led the world in banking for centuries. And we have harnessed our strength in financial services for the benefit of our communities. Businesses have been able to get loans to grow and provide jobs; families have been able to get mortgages to buy new homes; innovators have secured funding to pursue the ideas that have powered our economy.

Too often the UK media talks about the industry as if it is confined to the City of London. In fact, financial services are a vital part of the economy across Britain. And nowhere more so than in Scotland.

Nearly 100,000 Scottish jobs – 1 in 10 - are financial sector jobs – in banking, asset management, insurance, law and accountancy. Both Edinburgh and Glasgow rank in the top 30 global financial centres. More than half of the world's 20 biggest financial firms have major investments here.

And I am confident that Scotland can do better.

Last July I convened a Group on Financial Services Global Competitiveness to prepare a report on the future of the industry, led by Sir Win Bischoff, one of the most respected and experienced global financial experts.

Today in Edinburgh I will meet with business leaders to discuss Sir Win's report and what it will mean for our local economy.

The report says that our financial firms can continue to be world leaders. But importantly it acknowledges that partnership is the only way for the UK financial sector to maintain its competitive advantage.

Here at home it must be a partner for the wider economy and for British businesses. Banks can support great prosperity for our people, but they must always be the servants of the economy, not its masters. Our financial firms must align their ambitions with the goals of manufacturers, farmers, small business owners, and others who are responsible for so much of our nation's wealth.

And the UK financial services industry must be a partner with other financial centres around the world, as we all seek to gain from the growing wealth of emerging economies like China, India, and Brazil.

The demand for financial services will continue to grow as the global economy is expected to double in the next 20 years. But we will not win by trying to undercut our competitors. The lessons of this crisis are that we must support sensible regulation and smart practice in all corners of the globe.

Which is why Jim Murphy and Owen Kelly, Chief Executive of Scottish Financial Enterprise, visited Beijing and Shanghai in March, making the case for an ever more prosperous partnership between us.

So I'm absolutely confident that Scotland has a bright future in financial services. I know that the industry can overcome this difficult moment and emerge stronger than before. And I'm certain that we all have a stake in supporting its success.