May I begin by apologising to you, Mr Deputy Speaker, and to the Minister for the fact that I arrived after the start of the debate? The flight down was fine, but the Gatwick Express was not. Had it not been for that, I would certainly have been here.
May I briefly echo the words of my hon. Friend the Member for Chichester (Mr Tyrie) in praising the staff of the commission, who did a truly outstanding job? One thing we did was to break out into panels—he chaired one, as did I and nearly everyone else at some point—where we had individual staff, and they were very impressive and helpful.
I wish briefly to address a question raised by the hon. Member for Chichester, who chaired the commission, by explaining why I feel it is of the utmost importance that the proposals we made are not only taken seriously but passed into statute, and why we came to some of our conclusions. We deliberated on the issues for hours and hours. As anyone who has read the transcripts of the Treasury Committee’s meetings from years gone by will know, I started out seeing things from a full separation point of view. I am a fairly unreconstructed Glass-Steagall supporter, but I do think that one needs to be guided by the evidence. The commission received a great deal of evidence, and I came to the view that although that principle is still one that I adhere to and think is right, there were greater complications in today’s modern operation of the financial services and markets than perhaps had existed when Glass and Steagall got together and that it was wise, therefore, to listen on that. So what I looked for, as did other colleagues who came at it from different angles, was to give the best effect to what we were seeking to achieve.
The right hon. Member for Wolverhampton South East (Mr McFadden) rightly said that the commission linked structure and culture, and I was struck by the way in which the different cultures in banking are competing. One of the easiest ways to look at this, whether we are considering the Volcker rule, prop trading or whatever, is that there are two distinct cultures in every large banking organisation. The first of those is the professional culture of the people seeking to work with and help individual clients, who are involved in investing or looking after depositors. I do not gainsay that the vast majority of people operating in the world of banking are professional, wish to be professional and wish to have high standards. The second is the completely separate trading culture, where there is no client at the end of the day; it is a zero-sum game where
two people, or two sets of people, are trading specifically to make money and to beat the guy on the other side of the trade.
The problem so often was that although trading was necessary to give effect to that desired on the investment side, when the trading side took over in terms of profit and culture it infected the other side. The whole thing is about seeking to keep the cultures apart. People have talked about high-street commercial banking as being good and investment merchant banking as being a casino and being bad, but I do not take that view. I would split the types into three, because there is retail and commercial banking, investment banking and trading. All three have their uses, and how they relate and how they are governed is the important thing.
The universal bank clearly works, but if all the banks are universal banks, it does not, and that is the problem with it. If everybody is pursuing the same model, there is a real danger that the riskier side infects the more prudent side.