LONDON — HSBC Holdings PLC chairman Stephen Green said Tuesday that the "financial crisis is still far from over" and urged bankers to regain trust from customers and society as a whole.
"We cannot even say that we're past the worst or (that) the way out of the woods is clear," he said.
Green said there are still global macro-economic imbalances, loose credit conditions and dangerous overtrading in parts of the financial sector, among other problems.
He said these led to a "massive breakdown of trust" in the financial system, in bankers, in business, in politicians and in globalization.
Speaking at a British Bankers Association conference in London, he said the banking industry needs to restore that trust as well as confidence from customers.
Green said that "rebuilding trust is partly a matter of effective rules and guidance" and welcomed the U.K. government's review of financial regulation through the Turner Review and that of corporate governance of banks through the Walker Review.
Still, rules and guidelines "cannot in themselves be sufficient," he said.
"Unless we think more widely about our responsibilities, we will not have sustainable business models and indeed we risk losing sight of the very raison d'etre of banking."
This reason for being, he said, "is to provide financial services on a sustainably profitable basis to our customers."
He said rebuilding trust "means focusing on long-term customer relationships, not just the next transaction. Because it implies ensuring responsibility in trading, ensuring that management tests the suitability and transparency of products that are sold or transactions undertaken, not just their profitability."
Green, who is chairman of the BBA, also said that a "resurrected Glass-Steagall model, if you will, would be totally unrealistic." This refers to calls to separate retail banking from investment banking.
Last month, Vince Cable, shadow chancellor of the U.K.'s Liberal Democratic party, said momentum is building in political circles in favor of separating retail banking operations from investment banking operations.
Splitting banks into so-called "utility" banks, offering standard bank services to retail and commercial customers, and "casino" banks, that are active in trading and offer investment banking services, would somewhat mirror the Glass-Steagall model, an act passed by the U.S. Congress in 1933, which prohibited a retail bank from owning other financial institutions such as investment banks. That act was repealed in 1999.
"In this age of markets that are interconnected across both geography and product, it is a fantasy to believe that 'narrow banking' is the way to predictability and stability," Green said.
Customers today need an increasingly wide range of financial services and shouldn't be forced to go to different types of banks for different services, he said.
Green said that "the notion that the failure of a bank can be 'contained' by the conventional legal and administrative processes for handling business failures is nonsense."
"And it would still be nonsense even if the institution was wholly involved in the wholesale markets, had no direct retail presence, and did not have the benefit of any deposit guarantees."
He said this is the lesson from the failure of Lehman Brothers Holdings Inc.
