Addressing the think tank Reform's conference at the London Stock Exchange yesterday, Shadow Chancellor George Osborne, called for a new settlement between banks and society.
The Shadow Chancellor stressed the settlement must allow "a profitable and successful financial" services sector in the UK, but must also provide protection for taxpayers and the broader economy.
He attacked Labour for allowing banks to become over-extended and for ignoring the risks of the "asset bubble":
"No doubt the bumper tax receipts flowing into the Exchequer meant no one was very keen on calling time on the merry dance. But it has left us uniquely ill-prepared when the music stopped."
George condemned the idea that the only goal of macroeconomic policy should be to keep consumer price inflation near target:
"We believe government should take a view on asset prices and seek to manage the overall level of debt in an economy. Our proposal is to put the Bank of England in charge of that task."
He explained how, through our Debt Responsibility Mechanism, the Bank of England will monitor the levels of leverage in the system and call time on excessive debt.
George also emphasised the international aspect to the banking settlement:
"We would require banks across the world to set aside more money in the good years to provide them with a greater buffer for the bad years. I am delighted that this now appears to be on the agenda for the G20."