Financial Services Bill

Debate between Baroness Liddell of Coatdyke and Lord Stewartby

Tuesday 26th June 2012 Lords Chamber

[Baroness Liddell of Coatdyke]

My Lords, I am delighted that cleverer people than me have found this Bill incomprehensible, because I have real fears that we will get very lost in the detail of this Bill, and we will certainly get lost in the alphabet soup of acronyms contained within the Bill. However, I will return to the substantive issue.

The Bank of England is to be the pre-eminent financial services regulator. A regulator has to be transparent, consistent, and readily understood internationally. I would be delighted if, when the Minister replies, he will explain to us why it is necessary to vest such untrammelled power in the Governor of the Bank of England. The governor becomes much more powerful than the Prime Minister, who is, after all, only primus inter pares. The governor becomes completely unchallengeable. That is why the idea of a supervisory board in the amendment proposed by my noble friend is sensible.

I will not get tied up on titles. The court concept is anachronistic, and it is not readily understood by our main competitors. I am much more interested in the substance of supervision. One of the key elements of the work of the Bank of England as financial regulator will be to insist upon the best kind of corporate governance that we can get in our financial institutions. It should, therefore, be an example in itself in how it is governed. I have no confidence that that level of modern, transparent, corporate governance is in the model that is outlined in this Bill, as I understand it.

If people are tied up with the history of the Bank, which is long and distinguished, we can still have chaps running around in pink coats, and we can still have a wonderful collection of silver. However, at the end of the day, if we, as a nation, are to remain a leader in the financial services industry, we have to have a system of governance of our financial regulator that stands up to very tight scrutiny. I therefore urge the Minister, when he replies to this amendment, to give us some explanation as to why the Government have not come up with a model of corporate governance that gives that kind of confidence.

We will come to other elements when we talk about the role of the governor. I am extremely concerned about a repetition of what happened in the run-up to the run on Northern Rock. Some ill advised, perhaps unintentional, comments by the governor contributed to the run on that bank. We cannot allow ourselves to get into a situation where something like that could happen again.

[Lord Stewartby]

My Lords, I do not want at any length to add to what many noble Lords have said, except to record that this is one of the most incomprehensible Bills that I have had business with. Several times I started on what I thought was a trail of decisions, and at the end of it I could not work out who did what and how they knew what they should do.

I have one small technical question for my noble friend that is along those lines. I know that “macro” means “long” in Greek. I do not know what is meant by “micro”—which means small—so far as it is applicable to prudential regulation. Is the micro bit about the size of the body being investigated or about the scale of the activities of the regulator? I am not at all clear about this. Having come across these terms “macro” and “micro” regulation, I found myself unable to work out what quite a lot of these fundamental things mean.

Unfortunately, under the old regime there was a lack of clarity about who did what and who was responsible. However, I am not sure that we are getting away from that, as we ought to. It is a difficulty, and I hope that my noble friend can shed a little light on it. Many who have spoken in this short debate have pointed out that the Bill is not very easy to follow, to put it mildly. I would strongly welcome anything that would make it easier.