Britain's leading bankers will be encouraged by Chancellor Alistair Darling to learn lessons from the recession and invest in long-term wealth creation instead of quick profit schemes.
Mr Darling will be speaking at the annual Mansion House meeting in the City, and will stress the importance of strengthening the banking system on a national and international level, urging bankers to learn from the current financial crisis and begin making changes in their own boardrooms.
Ahead of the Treasury publishing its proposals to reform the financial regulation system, it released extracts from the Chancellor's speech. He will say: "Having stabilised the banking sector, we are faced with the challenge of building a stronger, more efficient and more resilient financial sector in the future," he will say, according to advance extracts released by the Treasury.
"Because anyone who thinks that we can carry on as if nothing has happened should think again. In every country we are paying a huge price for this crisis. Not just the financial cost, but also a profound social and human cost."
Mr Darling will also highlight the importance of banks changing their practices from within, after the large city bonus culture has been seen to contribute to the current crisis.
"I strongly believe that the process of learning lessons has to start in the boardroom," he will say.
"Bank boards must have the right people, skills and experience to manage themselves effectively... Their focus must be long-term wealth creation, not short-term profits.
"We also need to ensure that innovation and the complexity it sometimes involves is not an excuse for a lack of transparency or for avoiding regulation," he will say.
His speech will support the British tripartite system which is made up of The Treasury, The Bank of England and the Financial Services Authority. But he will further discuss the importance of global banking co-operation by financial regulators, but also encourage national bodies to co-operate better.
"Regulators cannot only look at their own backyard and hope to understand what is happening," he will say.
"But we need to ensure that progress at a European and international level does not allow national regulators off the hook."
He will recommend that changes are made to the risk assessment system, and encourage regulators to look at the whole financial system as opposed to each bank individually.
"This crisis has taught us that it is not enough to pass an individual firm as healthy. Regulators and central banks need to look more carefully at the system as a whole," he will say.
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