WHEN the Archbishop of Canterbury took to the stage on Wednesday evening to debate "What makes a good bank?" news had just hit the City that the banker he once took to task over his response to a similar question, had stepped down.

Stephen Hester, the banker, announced that he would leave his post as chief executive of Royal Bank of Scotland in order to comply with the Government's insistence that the bank return to private ownership by the end of 2014. As a member of the Parliamentary Commission on Banking Standards, the Archbishop once accused him of giving "motherhood and apple pie" responses to his questions about RBS' obligations to society (News, 22 February).

On Wednesday night, the Archbishop declined to say where RBS might find a "good man" to replace Mr Hester. But he said that "banks, to be good, need the fear of hell and the hope of heaven, not merely the fear of penury and the hope of a larger bank account."

Speaking at the debate at St Paul's Cathedral, organised by the St Paul's Institute, the Archbishop suggested that "the biggest weakness of all in the analysis of the failure of banks to be good banks has been around understanding about human beings. We have looked at banks as though sin did not exist and redemption and salvation were not possible."

He said: "At the heart of good banks are good people. And if we want to have good banks, we have to believe in fallible people. . . If we believe in fallible people, we will work on aspects of behaviour and training that is conditioning the body, that recognise that human beings are both more fallible than a systemic regulatory system will allow, and have greater potential than our pessimism might permit."

He called on the City to undertake a "deliberate, self-designed popping of the bubble of inward-looking self-regard". For him and his wife, both London-born, it had been a "great shock" to return to London, a "buzzing" place whose wealth was not replicated in most of the UK and which was in danger of developing "a culture of passing by".

"In a dystopian mood, it would be possible to imagine a future in which . . . the needs of the utterly cosmopolitan population are served by the disenfranchised residents of the surrounding countryside, what in Sparta were called the serfs," he said. 

An alternative was the "possibilty of wealth as life-giving water, spreading through all the channels of our national and global economy from the great well of talent and prosperity that is London". Differences in wealth and potential could be eliminated, he said, but not without good banks.

The debate was also addressed by Antony Jenkins, the group chief executive of Barclays, who, like Mr Hester, had been interrogated by Archbishop Welby in Westminster. He admitted that "being told off" by the Primate was "not a comfortable experience".

He began with a defence of capitalism. It had "lifted millions out of poverty", he said, and it was unlikely that the debate's venue could have been built without debt.

Nevertheless, he agreed with the verdict of the Church Commissioners that Barclays had "repeatedly let down society with its conduct" ( News, 17 May). Banks had become "too focused on the short term" and "forgot what our role in society was and who we were there to serve".

He argued that there was "no contradiction between doing well and behaving well", but accepted that many would be "sceptical" about his comments: "Capitalism and banking with a moral compass is our mission at Barclays, and we are happy to be judged by how we succeed."

Another panel member, Laura Willoughby, chief executive of Move Your Money, described the relationship between individuals and their bank as a "hostage situation", and urged the audience to take responsibilty by moving their money: "The more the banks rely on our inaction, the more we can be certain that they won't take any."

The Archbishops revealed at the start of the debate that the final report of the Parliamentary Commision on Banking Standards had been completed just twenty minutes earlier. The Commission was still in purdah and the audience would find no "hidden clues" about it conclusions in his comments.

Listen to Archbishop Welby's talk here.

www.stpaulsinstitute.org.uk