Chancellor slams bank bonuses in Wharf speech

The Chancellor was speaking at a Reuters Newsmaker event in Canary Wharf, and he didn't hold back on his criticism.

He said: "Some [banks] manifestly don't get it. What happened with Goldman Sachs last week sends the wrong signals.

"I've spoken to all our banks and none of them would be standing here today if the taxpayer hadn't put their hand into their pocket."

But Mr Darling stopped short of endorsing the view expressed by Bank of England governor Mervyn King that the biggest banks should be broken up to make them more manageable for regulators.

He said: "I don't think you can decide that in one type of banking you'll intervene and in one type you can't.

"Whatever we do it's got to be matched by similar action in other parts of the world.

"We've got to make sure that whatever we do, we do it in a way that looks after taxpayer interests here, and ensures a strong and stable banking system, but that action is taken in other parts of the world as well."

The Chancellor also made the point that bank regulators, including the Financial Service Authority, must allow for banks to fail.

He said: "Mervyn King made the point that there are no simple answers to how you deal with banks that are large and complex.

"I also agree with his point that you cannot have a regulatory regime that contemplates no failure."

The Chancellor is also looking to make the slimmed-down banking system more competitive, which will be good news for new investors looking to buy Government shares in the likes of Lloyds TSB.

He said: "I made the point in July we have got rather less banks than are ideal. We do need to make sure we get more competition in the system, which is why - when we come to divest the shareholdings in the banks - we can make sure there are new entrants."

And he pledged the Government would continue to support the economy until the recovery is complete.

He said: "It's too early to sit back and relax. The situation in the world economy remains fragile.

"We need to continue to support our economies, helping those struggling to deal with the impact of the downturn, until they are able to stand on their own again.

"And one set of data showing positive growth will not be enough. We need to ensure the recovery is embedded.

"As we come through recession and rebuild fiscal strength, we must now secure the growth that will create jobs for our children and grandchildren.

"That is entirely possible, but only if we make the right decisions. Three steps are needed.

"First, we must support the economy until we are sure the recession is over. Some are tempted to think the crisis is over. It's not. Banks all over the world are still dependent on government support.

"Unemployment continues to rise, but some still call for an immediate end to support for businesses and families.

"Ending support now would be wrong and dangerous. And I can tell you not one of the 186 IMF members, across all political persuasions, shares that view."