THE head of one of Britain's biggest banks has warned the credit crunch will last for up to two more years.
John Varley, head of Barclays Bank, has forecast that consumers and businesses will struggle to access credit until 2010 at the earliest.
And he said banks should apologise to customers to regain their trust following the fiasco in the banking sec
tor this year.
Varley warned the banking industry was facing a "public relations crisis" and would not regain the public's trust until it said sorry for what has gone wrong this year, with many institutions in trouble threatening thousands of jobs and crippling consumer confidence.
Among the worst hit are two of Scotland's most prestigious institutions, Halifax Bank of Scotland, which is being taken over by Lloyds TSB, and the Royal Bank of Scotland, which has received a massive government bailout.
Varley warned: "We have to have a banking industry in which consumers have trust and in some cases that trust has broken down.
"If I ask myself, 'Do I feel the industry should be self-confident about recreating that trust through time?' I do feel that, but it starts by saying sorry. It starts by admitting things went wrong."
He said he hoped his own bank was one of those in which customers still had trust.
He added: "If you look at the industry as a whole – if I speak as a member of the industry rather than as chief executive of Barclays – I absolutely have to say we should share our portion of responsibility."
Varley said that a reduction in the overall quantity of debt in the economy was necessary.
"I think that we will see the process of reduced borrowing play out over at least the course of the next 12 months maybe, maybe 24 months," he added.
Varley is not the first senior banker to admit failings in the wake of the financial crisis. In November, RBS chairman Sir Tom McKillop said he was "profoundly sorry" for his company's financial difficulties which left it needing a £20bn government rescue package, with the government taking a stake of up to 57% in the bank in return. RBS has announced it is to cut 3,000 jobs.
Last week, the Prime Minister attempted to boost public confidence in the economy by promising to make the country a "beacon of hope" amid the global turmoil.
Gordon Brown again blamed international factors for the slump in Britain, insisting the country had been the victim of a global downturn.
He said: "These are uncertain and difficult times but Britain can and must be a beacon of hope and opportunity for the future. The scale of the challenges that we face is matched by the strength of my optimism that Britain can rise to meet these challenges. With our fighting spirit and our can-do attitude, I am confident that we can meet all the challenges ahead."
He said the Government would be bringing forward fresh measures in the new year for "smart investment" in "green" jobs, the digital economy, and transport infrastructure – including a decision on a third runway at Heathrow.
"Of course there is volatility in every economy in the world and of course exchange rates are going to go up and down depending on a number of things," Brown said.
"But the basis of our economy is how we target inflation to get it down. The day-to-day movements of a currency and of the pound are not something I want to give a running commentary on."
He refused to be drawn on how high he expected the jobless total to rise. However, he promised that the Government would do more to re-train people to find new work as well as taking further action to restore the flow of banking lending to business.
