By Max Clarke

Banking is a structurally flawed industry that has failed its customers, its investors and the taxpayers who stand behind it.”

This was the opening of Business Secretary, Vince Cable’s speech yesterday at the The Which? Banking Reform debate in London evaluating the industry over the past 15 months.

There has, noted the outspoken business secretary, been considerably reform over the year, notably:

UK banks have stabilised and acquired a stronger capital base- UK headquartered banks have combined balance sheets of £7 trillion, over four times GDP.

Second, rapid deleveraging has occurred. One major and damaging casualty has been tightening availability of conditions of credit for SMEs which are needed to power economic recovery. The latest Bank of England figures suggest this problem has been getting worse since the recovery started.

However, smaller businesses continue to struggle as the stock and flow of lending to business have been contracting since late 2009. Lending to smaller businesses (those turning over less than a million pounds) has been particularly affected. We have agreed lending commitments with the banks, to make sure they make credit available to small businesses, but the first quarter results showed weak trends and we wait to see whether lending has recovered for the second quarter.

In the last year, the Coalition Government has taken important steps to put banking policy on a better footing: we have introduced a permanent levy on bank balance sheets; strengthened bank regulation for example in relation to country party clearing of derivatives and shadow banking; tightened controls over cash bonuses; curbed bank tax avoidance.

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