THE Archbishop of Canterbury has hit out at the "rotten culture" which afflicted Britain's banking industry.
The Most Rev Justin Welby said the "struggle" to change that culture had begun but could take a generation to complete.
He told peers: "On the outcome of this struggle hangs, to a considerable extent, the flourishing of our society and the re-establishment of the reputation of our most successful industry."
In a debate on reports by the Parliamentary Commission on Banking Standards, of which he is a member, the Archbishop said Parliament must hold regulators and market participants to account.
Bankers' pay should be "reasonable and proportionate" and regulation must be "effective and accountable".
His comments come days after unconfirmed reports that the Royal Bank of Scotland will pay out £500 million in bonuses this year. The Edinburgh-based bank also faced criticism this week when a computer failure left millions of people unable to use their debit or credit cards on one of the biggest online shopping days of the year.
Ross McEwan, who started as chief executive at RBS this month, said that a "lack of investment in its systems over decades" was behind the problems, with sources later saying a key period came during Fred Goodwin's time at the helm when "money was spent on acquisitions rather than integrating and improving the systems".
On Wednesday RBS was among eight global banking giants, including Barclays and Deutsche Bank, fined a record €1.7 billion (£1.4bn) for forming illegal cartels to benchmark interest rates.
The Archbishop, speaking last night, said that while progress had been made on structural and regulatory aspects of banking reform, "if we think that by changing the law we have solved the problems revealed by the crisis we are profoundly mistaken", he warned.
The "rotten culture" found in the banking industry - hit by "scandal after scandal" since the crash of 2008 - had to be changed for good, enabling banks to respond better to customers and the "well-being" of society, he said.
"Without good banking, savings stagnate in fetid pools of hoarding and good ideas and entrepreneurial vigour wither without the water of capital and liquidity."
The Archbishop said a culture of service and social purpose was needed. But law and regulation could not force people to be good.
"The struggle to change the culture has begun. It will be a long one. Our own view is that we are talking of years, decades, a generation perhaps, to embed a completely different culture - to replace the one that seeped slowly away over the years from big bang."
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