Lord Mayor, Ladies and Gentlemen.

Highlights from Chancellor Osborne’s Mansion House speech. The Chancellor marked the changing of the guard at the Bank of England with Mervyn, now Lord King, retiring with high praise both for the incumbent and for the much anticipated arrival Mark Carney from Canada, in the opening of his annual Mansion House speech.

"But while Britain has left intensive care, we still need to secure the recovery – and make sure we continue to treat the ailments that brought us low in the first place.”

“And a banking system that was badly regulated, ran risks it didn’t understand and had to be bailed out at huge cost by the taxpayer.”

He went on to trumpet the success of the various intervention schemes in the housing market and small business, and signalled that market support had been beneficial and that he is considering what other measures might support confidence including it seems a Bernanke type indication of how long support (QE?) might be on the table.

Interesting given the Feds efforts to wean the US markets off this kind of support that along with Chinese credit uncertainty has led to significant market gyrations today.

Once on the life support system it appears it is not so easy to turn off the cheap money

 Support for the City was more evident than in earlier times

“I want this City to grow as the pre-eminent centre of international finance.

So whether its legal services, accountancy, insurance, hedge funds or shipping, we stand ready to promote our world beating financial services.

And those world-beating services include our global banks.

They need to be part of our successful future.”

But, the all important caveat comes next:-

“To do that, we must resolve what I described two years ago at this dinner as the ‘British Dilemma’.

How can we remain the international centre for banking, while protecting taxpayers from the catastrophic costs when banks fail?”

His prescription?

Backing ICB and ring fencing, backing Andrew Tyrie’s Commission on banking standards (except for the bits he is not too keen on such as scrapping UKFI), and committing to incorporate key features in the reform bill currently before Parliament.

Yet more reviews were announced to ensure competition, backing Challenger banks, bringing forward a market review of small business banking services, and resolving the uncertainty over return of Lloyds and RBS to the private sector.

£65bn was invested in Lloyds and RBS, and this would be a pretty handy sum to get back given the banks have already had to service significant ongoing payments to the Exchequer for the use of this cash.

Interesting the annual public finance deficit is now around £66bn overall so cashing in might allow the Chancellor to claim he has begun to pay down absolute debt?

Would splitting into a good and bad bank accelerate this process? He has floated the idea but kicked the can down the road a bit by calling for a Treasury review on options. Passing all the bad assets into Ulster bank and selling off RBS must be tempting. Is the review cover for a sale recommendation? Only time will tell.

But Lloyds will be sold although he was a bit coy on exactly when. Given it is above the entry price he only needs to wait a short while before he can sell at a profit, indeed he could claim to now if the servicing of funding is taken into account, the first hints of the future for Lloyds and RBS.

So no real surprises, lots of rehearsing of the benefits of prudent management of public finances, coupled with chastening and encouraging words for the banking industry in one and the same breath.

Steady as she goes, the medicine is unpleasant, but the Doctor is convinced it is working.

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