For a generation or more, businesses and families up and down the country were told, not least by the City, that the disciplines of the market economy were essential, even if painful in the short run, for greater prosperity in the longer term. That belief in the merits of a market economy was embraced and for many years was not misplaced. But out of the blue – in this case the financial sector – came a crisis that did not stem from weaknesses in the real economy. It has wreaked havoc on those same businesses and families. Unemployment, as we saw in today’s figures, is rising sharply. And yet it is the banking system that has received financial support on an almost unimaginable scale. We who work in the financial sector have much to do to regain the trust of those who work outside it. “My word is my bond” are old words, but they were important. “My word is my CDO-squared” will never catch on. There is no support in this country, and no case, for excessively bureaucratic regulation. But change to the structure, regulation and indeed culture of our banking system is necessary. Blaming individuals is no substitute for acknowledging the failure of a system, of a certain type of banking. We have a real opportunity now to put that right, and regain the trust that has been lost.
But if they are not adequately addressed - whether within the system as a whole or at the level of the individual market or individual firm - they could - like purely financial failures - weaken public confidence or attract public responses, which would have a damaging effect on overall activity. Mr Chairman, I can’t imagine that anyone working in the City will become bored as we move into the new millennium in the face of these challenges. How successful we are in confronting them will depend, as in the past, upon the interaction of the technical and professional skills and self-discipline of the market and the structure, substance and application of the rules of the game as they are reflected in public policy. We have unique experience within the City on which to build. The market has repeatedly demonstrated its capacity to respond successfully to new challenges and currently attracts representatives of the strongest participants from all parts of the world. It is supported by very highly qualified professionals and professional bodies which play an important role in setting and maintaining standards. It is supported, too, by an extraordinary range of specialist professional and technical organisations, which help to ensure that the rules of the game are sensibly formulated and clearly understood.