Scottish Financial Enterprise chief executive believes industry must restore trust
Promoting the interests of the Scottish financial services sector could be looked upon as something of a poisoned chalice in the past few years.
Indeed you could forgive Owen Kelly if he felt he needed to don boxing gloves to deflect the increasingly heavy blows being landed on the industry.
It was certainly a rude awakening to his role as chief executive of Scottish Financial Enterprise (SFE).
Still after two decades in the civil service he knew a bit about negotiating the rough and the smooth.
But for someone who confesses to having "little" knowledge about the industry before taking over at SFE at the end of 2007 he had to go through a baptism of fire.
Within months the worst economic crisis in living memory was evolving with major homegrown players - Royal Bank of Scotland, Dunfermline Building Society and HBOS - among the institutions left teetering on the brink of disaster.
Even though many Scottish based financial services firms have remained profitable most have had to shed jobs to cope with the changes to the global market place.
Kelly said: "It was only a few months after joining that the financial crisis really broke.
"Over the course of 2008 it was a much more shattering experience than what was to that point largely a cheerleading role for the industry.
SFE lists its main priorities as influencing government, regulators and policy makers in Scotland, Westminster and Brussels to ensure an internationally competitive business environment for the financial services industry."
Despite a lack of industry knowledge Kelly's 20-years in the Scottish office plus an enviable contacts list hint as to why he was headhunted for the role.
Having had time to immerse himself in the ins and outs of the sector he is much more clued up on where it needs to go in the post recession era.
And he concedes better regulation is needed if the industry is to regain the fuel which stokes its fire the trust and confidence of customers.
He said: "We have seen an awful lot of regulatory change at the UK, EU and international level already but there is still a lot of uncertainty.
"Regulation really matters to this industry because it is the framework within which we provide services to customers.
"The really big challenge the industry faces at the moment is restoring trust among our retail customers, corporate customers and in the wider markets.
"There are some areas where more regulation is needed and other areas where better regulation is needed.
"The majority of that challenge lies in the better rather than the more."
The Independent Commission on Banking has made its recommendations on whether to separate traditional retail banking from the far riskier and potentially more lucrative investment banking.
Kelly believes consumers will suffer if banks have to split their operations.
He said: "My own view is, if you look at the banks that did fail - Northern Rock and Lehman's neither of them was a universal bank.
"Lehman's was an investment bank which failed but Northern Rock was a retail bank.
"So I don't think the act of separation itself necessarily introduces the kind of stability the regulators are now looking for.
"When Lehman's went down, you might say, 'it was an investment bank with no retail operation, so couldn't they just fail?'.
"What we have now learned from experience is the integration of all these big institutions is such we saw a near collapse of the whole banking system when Lehman collapsed.
"In my view the big challenge is dealing with the systemic risk of these individual institutions.
"The governor of the Bank of England has said on the record we simply can't have a system in which banks, or indeed companies, are too big to fail.
"But a banking split would limit some of the options currently available to customers such as fixed-rate mortgages. In order to offer such mortgages, you have to have a way of accessing the global capital markets.
"To my knowledge the only way to do that is to have some form of relationship with an investment bank.
"Separations within the financial system won't come without a cost to services to retail customers."
Already the G20 nations have put together The Financial Stability Board to identify banks which are systemically important to their respective economies.
Banks seen as too big to fail will be forced to hold higher capital and liquidity standards - effectively greater reserves of money - than the proposals already outlined by the Basel III regulations which come into force from 2013.
Kelly said: "Once we have a definitive list of those institutions deemed too big to fail, there will be a system devised to ensure an orderly transition of the business to avoid taxpayers having to bail out those banks in the future, but there is more work needed on the regulatory framework.
"At a UK level there is an awful lot of regulation coming in at the same time which is a bit like building a car while you are trying to drive it.
"At the moment we are beginning to see some regulatory overlaps and we will see some real difficulty if regulators start to tread on each others toes."
Another hugely contentious issue in the sector is the subject of bankers pay and bonuses, particularly the packages given by banks which continue to enjoy taxpayer support.
Kelly admits, there are justifiable concerns at the level of rewards being handed out but hopes the days of seven and eight figure bonuses are coming to an end.
He said: "We can all understand the public concern about bonuses, though very few of these headline grabbing ones are awarded in Scotland.
"My own view is, if you want to compete in investment banking and currency trading and those types of activities, then it is an internationally competitive market.
"If you want the best talent to do that kind of business for you, then you have to pay them because that is how you attract them.
"If you think of a bank which is being told on the one hand it needs to make money to pay back its shareholders - and in some cases that is the taxpayer to make that money you need to compete in those markets.
"So I don't think we can expect individual banks to peel off and walk away from that.
"But in the long term the increasing capital requirements is going to make banking less profitable, and I believe it will be the market which ultimately drives down bonuses."
Kelly says despite the general mood of economic uncertainty, the outlook for financial services in Scotland is extremely good as it has a diverse range of businesses.
He said: "Scotland is actually enjoying a period of considerable growth in financial services particularly in asset management, asset servicing and professional services.
"We have seen a lot of new investment coming into Scotland from the likes of Barclays, State Street and others, and that has been welcome.
"It is partly driven by the market opportunity here and partly driven by the fact Scotland is very good to do financial services business because of the skills of the people we have.
"I think it is absolutely unarguable the reservoir of skills we have in Scotland forms the very core of our international appeal.
"That is why Tesco Bank, Virgin and Blackrock have all chosen Scotland as the place to invest for the future."
However Kelly is adamant the industry cannot become complacent about the talent at its disposal.
He added: "Keeping up with the demand for skills is a challenge.
"I believe we need to do more in terms of training and introducing new qualifications.
"It is the knowledge base which will help us to keep pace with renewed growth."
Owen Kelly grew up in London but adopted Scotland as a second home after coming to Edinburgh to study in his late teens.
Kelly's early academic interest was in languages with Greek and Latin favourites in his early school years.
He went on to read Chinese Studies at Edinburgh University in the early 1980s.
As part of the course he spent a year in China with most of his time spent working in a compound for non-natives to the country.
He said: My letters were read, I couldn't make phone calls it really was that old totalitarianism communist system and foreigners were very few.
"If you left the compound you would attract a crowd of hundreds of people."
After graduating he briefly worked in Japan before returning to London to work as a translator in a typesetting company.
Then he joined the civil service, initially with a role in customs and excise before moving on to the fast stream programme for high achievers.
Kelly opted for a post at the Scottish Office and spent the next 20-years there.
His roles included a stint in Japan to promote inward investment to Scotland before moving to law reform, fisheries, and then health.
After a spell as private secretary to the Tory minister, Lord James Douglas Hamilton Kelly became private secretary to former first minister, Jack McConnell.
He left the civil service at the tail-end of 2007 to take up the role of chief executive at Scottish Financial Enterprise.
In his spare time Kelly, who lives in Edinburgh with his family, enjoys good wine, books and reading and writing Chinese poetry.
As a new dog owner, he is now spending a lot more time outdoors.