My Lords, I think that there has been a slight misunderstanding. My noble friend the Minister said that we have gone down the ring-fencing route instead. That is a different matter altogether. The idea of ring-fencing is to put a sharp barrier between the commercial banking operations of a universal bank—the lending to individuals and to small businesses and, indeed, medium-sized businesses—and the investment banking activities. There should be a line between them. There is also the great question, which we debated earlier, as to whether there should be a total separation. This is about whether a universal bank—I agree with my noble friend that it would not be done in the ring-fenced part—should be permitted to engage in proprietary trading at all.
It is all very well to say that there may be cultural contamination as a result of proprietary trading but that, as there are other forms of cultural contamination as well, we should not bother about this one. I do not buy that. If we can significantly reduce the amount of cultural contamination by making proprietary trading by banks illegal, that is a plus. There may still be other problems with the banking culture, but at least we would have solved an important part of it.
My noble friend the Minister also seemed to say that there was no need to review this issue. There is a need to review it for the very reason that the noble Lord, Lord Turnbull, pointed out. The overwhelming
weight of evidence received by the commission in conducting its inquiry was that it would be a very good idea for banks not to engage in proprietary trading for some of the reasons that I and other noble Lords have given in this short debate. However, as the noble Lord, Lord Turnbull, identified, the problem was how precisely you define proprietary trading and distinguish between it and market-making and some of the other activities referred to.
I have known Paul Volcker for 30 years. He is a very wise old bird. I am not suggesting that my noble friend the Minister is not wise, but of all the people I have known in the financial sector Paul Volcker is among the wisest, if not the wisest. If he thinks that this measure is desirable and workable, that carries a great deal of weight with me. He said that if a chief executive of a bank did not know whether or not he was engaging in proprietary trading he ought to be fired. At one level that is a perfectly good answer. Nevertheless, there is a complicated issue of definition. That is why we have said that we should see how things develop over the next three years and see whether there is a workable system in the United States or whether those who say that it is completely impossible to have a satisfactory definition because it will not work are right. We will find that out and then we will take action accordingly.
It is nice to hear mention of the notion that the PRA can bear down on proprietary trading as it implies an acceptance that there is, or could be, a problem. However, that is not the same thing as saying very clearly that no bank should be doing this, even if it is not a ring-fenced bank. At present, the Bill does not go far enough in that regard. This is something to which we will almost certainly wish to return on Report. I beg leave to withdraw the amendment.