The new chairman of Barclays has told MPs that Britain's banks must prioritise reputation over profits to tackle cultural problems within the industry.
Sir David Walker, who will succeed Marcus Agius as Barclays chairman from November 1, signalled an overhaul of pay policy at Barclays was on the cards as he suggested a restructuring of remuneration was required to change the culture among banks.
Addressing the Parliamentary Commission on Banking Standards joint committee, set up in the wake of the Libor-fixing scandal at Barclays, Sir David said in the recent past boards and banks had "not focused on culture".
"If anyone in the organisation faces any decision that he or she is taking in relation to a client and there's a choice between profit and reputation it's clear where priority should be given," he said.
"Reputation should be the driver and profit should come second in any choice. I would start by changing the remuneration structure and inappropriate incentivisation."
Opening his evidence, Sir David, who oversaw a review into bank governance for former prime minister Gordon Brown, said the issue of banking standards was "very serious". He said: "Standards have slipped in a grave way."
But Sir David confidently said the fall in standards was "repairable".
Discussing the role of shareholders, Sir David said they were "part of the problem" as they focused on short-term performance, while banks should do more to look beyond fund managers to investors.
The committee has been asked to report on proposals for legislative action no later than December 18 in time for the Government to include any of its recommendations in its Banking Reform Bill.
Its membership includes Tory former chancellor Lord Lawson of Blaby, Labour former chairman of the Treasury select committee Lord McFall of Alcluith and the Right Revd. Justin Welby, Bishop of Durham.