Professor Philip Lane:

I will make one general point in response to the Chairman and Mr. Sibley and Ms Rowland will comment on some of the other issues. One way to think about the gear shift in regulation, not just here but globally, is that these cultural issues are not new but they were overlaid by an instability issue. We had the reckless lending of 15 years ago and the facts that these banks basically collapsed, needed extra capital and needed to change their liquidity funding.

There has been much work to ensure these banks at the macro level of aggregate lending have enough capital to stand behind their businesses and are not overly reliant on short-term funding. We should remember we have the mortgage rules now. Those kinds of macro matters are being dealt with and there has been much progress. With the stabilisation of those indicators, there is now more visibility of more hidden issues, such as how the banks treat customers. The good news is the processes go hand in hand. The fact that banks are in better shape in a prudential sense allows us to change our supervisory priority towards looking at a higher level of ambition and to ask not only whether banks are safe but whether they are adhering to the standards we expect them to adhere to in terms of customer focus. This is a new reality and it is the next phase of supervisory focus. There are permanent challenges to maintaining stability but if the banks are now in better shape, we can do more in focusing on customer treatment issues.

Mr. Sibley will deal with the Chairman's comments.