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I’m very glad to speak to you at a time when we can say � with some confidence � that the British economy is on the mend.

Not fully recovered, but on the way back.

Last week, the IMF revised UK growth up by more than any other G7 economy.

And last month, the first sale of Lloyds� shares�

At above the price the previous government paid�

Represented a very important milestone.

And I can tell you that in future sales we will look for ways in which the British public can get involved.

Because we are mending the economy,

And the tax payer is at last getting their money back.

It has been a long, hard road.

And � for the avoidance of doubt � there’s a long way to go.

But we shouldn’t forget how we have laid the foundations of this recovery.

Rescue � Banking Reform

First, my party took the decision to enter into a coalition government.

A decision that ensured we had a stable government able to act decisively.

We then had to ensure that we wouldn’t see a repeat of the situation we faced five years ago.

And that involved:

• taking tough decisions to restore the credibility of this country’s finances
• reforming a tax and regulatory system that was holding back our businesses
• investing in infrastructure and skills as part of our long term growth plan

But it also involved � perhaps most relevantly to those of you in the room today � ensuring that our banking system was regulated to minimise future risks.

That’s why we introduced The Financial Services Act, which placed responsibility for financial stability with the Bank of England.

That Act � as you know � created a new prudential regulator � the Prudential Regulation Authority, led by Andrew Bailey who joins us today � as well as the Financial Policy Committee, which has been charged with identifying, monitoring and taking action to remove or reduce systemic risks in our financial system.

And we’ve also taken radical action on bank resolvability�

More so than many thought possible�

A central feature of which will be the ring-fencing of retail from investment banking.

Now I know that this policy hasn’t been without its detractors, there may even be some in this room�

But when I talk to my constituents up in Inverness�

When I talk to people across the country�

They want the reassurance that when they put their money in the bank, that money is safe.

And they want reassurance that the taxpayer will be protected should banks go awry in future.

And this policy will help to achieve that.

We’re continuing to take further steps where we can � towards building further stability.

On the 1st October, we proposed to introduce bail-in in the UK through the Banking Reform Bill, which is currently being debated in the UK Parliament.

And our intention is that this will � once the Bill has completed its passage through Parliament � give the UK resolution authority full powers to bail-in creditors from a failing bank that has entered resolution.

And we’re taking action internationally too�

In forums like the G20 and the Financial Stability Board�

In the discussions around Basel III�

And in Europe, on the creation of a properly functioning Banking Union.

While the UK won’t be joining Banking Union, it is absolutely in our interests that the right structures and governance are in place to ensure the stability of the Single Currency in the long term.

Growth

It is crucial to our future growth that the banking sector helps to invest in British business.

That’s why this April we chose to extend the Funding for Lending Scheme by a further year.

And this morning I’d like to publically thank the seven major lenders that agreed this July, to publish their business lending data, across 10 000 individual postcodes�

Implementing a proposal made by Liberal Democrat peers Lord Sharkey and Baroness Kramer during the Parliamentary passage of what is now the Financial Services Act.

This means that � from next year � businesses will be able to see exactly where the major banks are lending.

And � more importantly � where they aren’t.

I’m very grateful for the positive engagement of today’s host � the BBA � and some of our largest lenders on this.

• I think it represents a major step forward in terms of transparency
• it should encourage competition by helping smaller lenders to identify gaps in the market
• will allow businesses to hold their local bank to account where they aren’t lending

I’m hopeful that this small change will have a big impact on the amount of money reaching our businesses�

Especially Small and Medium Sized Enterprises�

Because those are often the companies finding it hardest to access finance�

Despite the fact they could play a key role in delivering economic growth.

But we mustn’t simply look at growth within the UK.

This is why we have created the Financial Services Trade and Investment Board.

The Board � which met for the first time last week � will lead the government’s drive to:

• attract inward investment
• promote external trade
• remove barriers

For our financial service firms.

I have great expectations for what the board will deliver�

Because we have always been a country that has looked globally for opportunities.

And our financial services�

The organisations represented by many of you here this morning�

Have the skills and the expertise that could help to support a recovery, not just in the UK � nor even just in Europe � but worldwide.

London’s role as the Western Hub for Renminbi business is a central part of our strategy to bolster the city’s position as a truly international financial centre, with benefits accrued far beyond the financial services sector.

We’re keen to strengthen the UK’s position as the western centre for Islamic finance.

And a taskforce has been set up by government to promote Islamic finance both within and outside of the UK.

We also want to increase the consistency of international regulation and market access;

So we’re taking an ambitious approach in negotiating the EU’s free trade agreements with our key partners, including the United States.

Europe and Scotland

This idea of looking internationally is � to me � an incredibly important one.

And there are two big challenges on the horizon that I want to talk about briefly.

Both of which relate to fundamental questions about how countries and peoples should relate to one another in the modern world.

In Scotland, the question is should we set aside 300 hundred years of participation in the most successful political, constitutional, economic, monetary and social union between countries in world history?

And, as a United Kingdom, should we draw back from full hearted engagement in our European neighbourhood to watch the development of the world’s largest trading bloc from the sidelines?

No prizes for guessing my answer to those questions. It is, I suspect, the same as most of yours.

I believe, as a country we are at our strongest when we are open, engaged with the world, showing leadership and shaping the future.

Now is not the time for either Scotland or the UK to give in to a narrow nationalism.

And both of those issues transcend politics.

It isn’t like a general election, where if you don’t like the government that’s been elected you’ll get another go in five years.

If Scotland leaves the UK, or if Britain leaves the EU, there will be no going back.

I want the banking industry to stand up and be counted in both of these debates.

The debate in Scotland is well underway.

And it could have a huge impact on our financial sector.

In 1812, in the Royal Exchange Coffee Rooms in Edinburgh, a number of Scottish financiers got together to discuss a way they could ensure that the widows�

And the sisters�

And the other female relatives� of their fundholders would be protected from poverty if that fundholder died during or after the Napoleonic Wars.

In 2015, Scottish Widows, the company that resulted from that chat, will celebrate their 200th anniversary.

And it is frankly unthinkable that when they celebrate that anniversary, they will be doing so in a head office in a separate country from the rest of the UK.

Of course, Scottish Widows are just one of many successful financial operations north of the border.

There are currently almost 100 000 people employed directly, and a further 100 000 indirectly in the financial services in Scotland.

Which represents around eight per cent of total Scottish employment;

And the sector contributed nearly £9 billion to the Scottish economy in 2010 � getting on for a tenth of Scottish onshore economic activity.

But while this activity is of enormous financial importance to both Scotland, and to the rest of the UK�

It means that the sector in Scotland is very large relative to the size of the Scottish economy.

As part of the UK, the size of our economy allows us to pool risks and support Scotland’s world-class financial services sector.

But were the public to vote yes to independence next year�

They would create an entirely new state, separate from the rest of the UK, with banking assets equivalent to 1 254% of Scottish GDP.

That’s more than Iceland, Ireland and Cyprus before their recent difficulties.

Now the EU debate has longer to run, but I believe on that too there is a responsibility for all voices on the pro-European side of the argument to speak up.

To win the argument in the early days.

And to extinguish the risks that are posed by the idea that the UK might leave the EU.

A few weeks ago I was in Washington.

Every single person I met in the White House or on Capitol Hill said the same thing:

What on earth of you doing talking about leaving the EU? Are you mad?

Incidentally, they asked the same question about Scotland and the UK

And they are right, on both.

Because whichever way you look at it

Jobs, influence around the world, our safety, the environment �

The UK is better off in the European Union.

I know that the EU isn’t perfect.

Far from it.

But it is far better for the UK to be a strong voice in Europe�

Fighting your sectors� corner on proposals like the Financial Transactions Tax�

Or making sure that the world’s two largest financial centres are at the centre of the EU-US Trade agreement.

Than for us to be a weak voice outside.

Our case is strong and simple.

The argument is ours to win.

But we will only win the argument if we make the argument in public.

We need business to be part of a coalition for the national interest.

We all need to stand up for Britain leading in a better EU.

Not just in your business interests, but in the national interest too.

Conclusion

I can see the growth potential in the UK, if it remains part of Europe�

And continues to take advantage of the trade opportunities, and collective strength that membership offers us.

I can see the growth potential in Scotland if it remains part of the UK�

And continues to benefit from our improved regulatory regime, our strong tax base and our economic stability.

And all that growth potential has to be underpinned by a well regulated banking system.

A system that treats consumers fairly.

A system that supports UK businesses�

And a system that takes advantage of global opportunities�

And I’ll look forward to working with you on those objectives, as we continue to build that stronger economy here in the UK.