Those are absolute prerequisites for stability in banking. Active, and sometimes intrusive, supervision of banks, and particularly of global banks, has to be at the foundation for stable banking and finance. I don’t think any reconfiguration of the structure of banking and finance is going to get us to an intrinsically safer system, taken as a whole. And we have to remember that this last global crisis, which is still with us in many ways, started not with large universal banks or large global banks, but with narrow or specialised players. Countrywide (the mortgage provider) in the US, Northern Rock in the UK, investment banks like Bear Stearns and Lehman Brothers. It was accentuated through AIG’s Financial Products division, which played a prominent role on the derivative markets. But it was not global banks that sparked off the crisis, although they helped propagate it globally. It bears reminding ourselves of that. BIS central bankers’ speeches  1  No matter how we restructure the system, no matter how we cut down or dice the pieces, banking will involve risk. And without the right culture – whether it’s about an investment bank or commercial bank or a mono-line player – and without the active and intelligent supervision, we’d have the same problems over and over again. The problems that underpinned this global crisis were old-fashioned problems – property booms that were misjudged by banks, regulators and borrowers; and the problem of banks relying too heavily on borrowing short term to invest long-term.
And I find it encouraging that Citi has been at the fore of this refocus on the basics of banking and finance. You’ve gone through a process of introspection in the last few years, because of the crisis and through the crisis, and you’ve come out stronger. Not just because of better capital and liquidity – although that’s obviously a pre-requisite for strength in the post-crisis era. But more fundamentally because you’re asking yourselves important questions about culture – questions about responsibility, and about the source of your profitability as an enterprise that intends to be around for a long time to come. So the story of Citi, and like the story of several other global institutions, is also about the recurring importance of certain basics. And the most important basics in banking have to be about serving your clients and growing with your clients, and about managing risks well. There’s a risk that we’re placing a too much importance in recent policy debates on the structure of banking. You read the headlines, you’ll find a continuing debate about how large banks should be, whether we should have narrow banks or universal banks, about the role of national banks and global banks, about the role of commercial banks versus investment banks and the rest of the shadow banking system. These are important questions of structure, but I think we risk an overemphasis on structure and an inadequate focus on the culture of banking and finance, and an inadequate emphasis on the need for active supervision.