Rather, Barclays' problems are an isolated case of a company getting its senior management structure wrong, said the chairman of NatWest Bank, Lord Alexander of Weedon.

The big UK banks are under a cloud over their failure to participate in the current global restructuring of banking and heavy losses from the Asian and Russian financial crises.

Meanwhile, their lucrative retail banking business is now threatened by a variety of competitors at home and abroad.

However, Lord Weedon says the British banking industry performs better than its European counterparts and compares "pretty favourably" with those in the US.

"We have seen some banks whose strategies have led them into these difficulties but, by and large, I think the UK banking industry is pretty sound," he told GMTV's The Sunday Programme.

I don't think you can say that because Barclays problems are typical of the British banking industry. Happily, I don't think they are."

But real questions remain about the future profitability of the sector.

Any further consolidation would mean thousands of job losses in the industry.

No global presence

The world banking sector has been undergoing huge changes both in the US and Europe, with the creation of global conglomerates capable of operating in all sectors and regions of the world.

UK banks lack a strong presence in the USA

In the US, the world's largest banking group, Citigroup, emerged from the merger of Citibank and Travellers Insurance, while regional banks have been scrambling to create a national presence.

In Europe, the two largest Swiss banks merged to form Europe's largest - UBS, while the coming of the single currency is expected to lead to further mergers within Europe.

Germany's biggest bank, Deutsche Bank, assured itself of global reach by buying Bankers Trust, a leading US investment bank.

But UK banks have been notable from their absence in any global deals.

Last November, Martin Taylor suggested that it would take a mega-merger, perhaps between Barclays and Natwest, to create a UK bank which was a serious player on the European or international stage.

But that plan never came to fruition.

Investment banking disaster

The UK banking sector has been a conspicuous failure at investment banking, the highly profitable but most speculative arm of the banking business.

It has been out-gunned by the larger US and Continental banks who have bought up older UK merchant banks like Kleinwort Benson, Morgan Grenfell, and Warburgs.

Last year Barclays began its withdrawal from a global banking presence by putting its equity investment arm, BZW, up for sale.

But it only managed to sell a portion of the business, to Credit Suisse First Boston, for £100m - far less than expected.

NatWest also disposed of its equity business - to BT Alex Brown, part of Bankers Trust.

Nevertheless, the remaining foreign exchange dealing section of Barclays - Barclays Capital - managed to lose £300m when Russia devalued its currency.

The UK banking sector is particularly exposed to the Asian financial crisis, with some of the biggest banks - HSBC and Standard and Chartered - closely linked to Hong Kong.

Retail franchise under siege

The UK clearing banks have had one advantage over their Continental rivals - a highly profitable retail banking business in the UK.

Tesco is now competing directly with the big banks

They have managed to keep customer fees high while shrinking the number of branches and shedding thousands of jobs.

But that business is now under threat from the rise of new banks with no branches and lower expenses.

First Direct has pioneered telephone banking, Prudential has has its Egg phone and Internet account, while supermarkets Tesco and Sainsbury now offer high interest bank accounts.

Mortgage business has also been hit by the strong competition for new business following the demutualisation of many building societies.

The UK clearing banks may have to merge in order to survive.