If the Government believed this issue was important, would the Chancellor have not made a statement to the House of Commons today? It should not take an urgent question for Parliament to hear why the Government are taking such a half-hearted approach to banking reform.
In a week when our national banks are facing record-breaking fines for LIBOR manipulation, when the Financial Services Authority is struggling to get a fair deal on payment protection insurance mis-selling for small businesses, whose customers have been mis-sold interest rate hedging products, when we see the bumper bonus season continuing to roll on and on for banking executives as if nothing had happened, and in a week when all this
suggests we should be getting serious about real reform, what has the Chancellor said in his seaside speech today? He has fudged the tough stance recommended by the Vickers report, and has stopped short on backstop powers and legislation for the leverage ratio envisaged by the Parliamentary Commission on Banking Standards, a commission that the Chancellor himself agreed to set up last summer.
I have to ask the Minister: why then does it feel as though the Chancellor has to be dragged kicking and screaming towards serious reform? Is it because, despite all the rhetoric and feigned concern, the Government know they face certain defeat in the House of Lords on the sensible recommendations of the parliamentary commission, and so think it best to try and salvage something from what is in reality a strategic retreat? Why will the Minister not legislate for a full reserve power for total separation of retail and investment banking if ring-fencing does not work, something that we called for last year and the commission specifically recommended? Surely it would be sensible to legislate now, not just if one or two individual banks misbehave, but in case ring-fencing fails the sector as a whole. He may think he has found a cunning ploy, but stopping short with only half the backstop powers just means that they are unlikely to be used. Corporate lawyers across the City will be rubbing their hands with glee at the prospect of taking on the regulator on a case-by-case basis. Worse still, why is he ducking the main conclusion of the Vickers report? Specifically, why is he refusing to adopt the commission’s recommendations on the leverage ratio and rein in the over-exposure of banks whose excessive risk-taking caused the problems in the first place?
Should there not be a clause in the Bill so that regulators can restrain such hazardous behaviour? Does the Minister agree that the implementation of the Bill needs a full parliamentary review on a regular basis, with genuine scrutiny of detailed secondary legislation on exactly how ring-fencing will work in practice? If the commission recommends a tougher code of conduct for bankers, proper professional qualifications and a fiduciary duty of care for customers, together with stronger controls on bonuses and remuneration, will he accept its judgment in the Bill?
With the economy flatlining and no plan for growth, why is there nothing in the Bill to improve the funding for lending scheme? We should not still be seeing lending to businesses falling further and further, month after month. The Minister has to realise that the public, the taxpayers and Parliament want to tackle this issue once and for all. The Bill needs further amendment, and if the Government do not have the courage to radically reform the banks, we will.