Britain is in the grip of a ‘depression’ and requires radical changes in banking to snap out of it, the Archbishop of Canterbury warned last night.
Speaking at a Bible Society debate on ethics in finance, Justin Welby described the financial crisis as a ‘generational problem’ driven by a slump in confidence as much as a breakdown in the markets.
He said: ‘What we are in the moment is not a recession but is essentially some kind of depression. It’s going to take something very major to get us out of it in the same way as it took something major to get us into it.’
Speaking at a Bible Society debate on ethics in finance, Justin Welby (pictured at Lady Thatcher's funeral) described the financial crisis as a 'generational problem' driven by a slump in confidence as much as a breakdown in the markets
The grim diagnosis comes ahead of the publication of official growth figures on Thursday which are, at best, expected to show Britain narrowly avoided an unprecedented ‘triple dip’ recession.
Welby, who sits on the influential banking commission of MPs and peers, called for a ‘revolution’ in banking.
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He said: ‘We need a revolution in the aims of banks so they exist to serve the society they are in. Companies are not self regarding things to maximise returns for shareholders.’
Despite calling for an improvement in ethics and standards at British lenders, he argued that some of the criticism of them has been unfair.
The Archbishop's comments echo those of Governor of Bank of England Sir Mervyn King
He said: ‘My experience of the last year on the banking commission ruins many of one’s illusions. They (bankers) don’t come in with horns and a tail burning £50 notes to light large cigars.’
He added: ‘One of the things they did is borrow short to lend long, a classic error.’
The Archbishop became the latest influential figure to suggest that state backed Royal Bank of Scotland and Lloyds Banking Group should be broken up into a ‘good’ bank to lend to the economy and a ‘bad’ bank, storing all their toxic assets.
This echoes comments made by Bank of England governor Sir Mervyn King earlier this year.
But Welby, who said he was speaking in a personal capacity, also argued a British lender should be broken up into regional banks to better serve their local communities.
‘Part of the banking system should be local, not London based. We need to bring new entrants in, and recapitalise one of the banks and break it up into regional banks.’
Welby’s comments come after the Church of England vowed last week to ‘turn the tide’ on a culture of lavish bonuses for bankers and business chiefs.
It slammed the ‘culture of entitlement and greed’ in bug businesses, saying it ‘rides roughshod’ over the Christian principles of justice and fairness’.
It promised to use the financial firepower of investments held in its £8billion pension scheme to vote against excessive pay packages.Its investments include Royal Bank of Scotland, Barclays, Shell and Vodafone.