Mervyn King last night rebuked the City as he insisted that much tighter regulations were needed to prevent a recurrence of the financial crisis and restore popular trust in the market economy.

Speaking at the annual Mansion House dinner, hosted by the lord mayor and attended by City dignitaries, the Bank of England governor insisted change was essential just as memories of the near collapse of the financial system last autumn were beginning to fade.

The crisis had caused a loss of trust in the financial sector, Mr King said, because ordinary families and companies were suffering from the recession while the banking system had received financial support on an almost “unimaginable scale”.

'We who work in the financial sector have much to do to regain the trust of those who work outside it,' he warned.

Financial Times