The City of London is both a globally important financial centre and a key contributor to the British economy. Moreover, much of the City works very well. London is the European hub for wholesale financial activities, a position that others abroad would love to usurp. Fortunately, all the signs are that London remains very competitive, offering both a regulatory system that is widely admired by capital market participants and a culture that is highly receptive to new ideas and encourages open and fair competition.

The successes on the wholesale side of the picture are, unfortunately, not fully replicated on the retail side of the financial services industry. Recent years have seen a string of problems that have often left savers feeling misled or, in some cases, cheated.

Last year’s Treasury select committee report on long-term savings listed just some of the problem issues. Half of with-profits policyholders, with savings worth around £160 billion, now find themselves in closed funds offering few growth prospects. Endowment mortgage policyholders are suffering a collective shortfall estimated at £40 billion. Savers with Equitable Life discovered a £3 billion shortfall and savers with precipice bonds have suffered capital losses estimated at £2.2 billion. Meanwhile investors in split capital investment trusts have suffered losses of over £600 million on products they often thought were “safe”.

The result is that many savers just do not trust large parts of the industry any more. As Ron Sandler, who conducted a major review of the long-term savings market for the Treasury told us, savers now trust the large supermarkets more than large insurance companies. In an industry as dependant on confidence and trust as long-term saving, that is a damning indictment of some of the largest institutions in the City. It is a situation we have to change.

The FSA has tightened regulation, exhorted the industry to improve and levied large fines when it hasn’t, but still parts of the City appear reluctant to change. Moreover, tougher regulation raises costs and we are already in danger of turning savings into an exclusively middle class habit, because selling to smaller savers on low incomes is not considered economic.

To break the impasse the Treasury select committee made a number of recommendations aimed at improving transparency and putting savers in a better position to decide for themselves on the suitability of a product. A linking theme of recent scandals has been that they involve complicated products that savers could not understand. That is why we recommended that all marketing material for savings products should have a short, simple summary box giving jargon-free information on the product, such as what it is linked to and if you are guaranteed to get your money back.

Another linking theme of the recent scandals has been that products were often presented as low risk when in reality they were far from “safe” investments. The summary box should therefore contain a simple, easily understood risk indicator. If that forces institutions to think long and hard about the real risks implicit in the products they sell, so much the better.

Perhaps the biggest surprise that emerged from our inquiry into the long-term savings industry was that many of the major institutions have little or no contact with retail savers and deal only with intermediaries. If the City is to regain the trust of savers we must establish a constructive dialogue between consumer groups and financial institutions. With that in mind we recommended the establishment of a forum bringing together all sides in the savings industry, something which, staggeringly, has never formally happened before.

I am delighted to say that our proposal has found wide support from the City, government and consumer groups. Indeed we hope to have the first preliminary meeting within the next few weeks. I think that is a very positive sign.

It is symptomatic of a growing recognition by many major financial institutions that things have to change if consumers are to really trust the City again. It also signals a growing appetite for action to deliver the needed changes. That is why I am optimistic this country will remain one of the strongest players in financial services in the world.