Independent Banking Commission Report

Lord Darling of Roulanish Excerpts

Monday 12th September 2011 Commons Chamber

[Mr Osborne]

Well, I think my right hon. Friend was certainly alive when Messrs Glass and Steagall were, which most Members of the House could not say.

I respect my right hon. Friend’s experience. He has long argued for some form of separation between retail and investment banking and has been consistent in making that argument. Events have borne out his advice to successive Governments.

We asked John Vickers carefully to consider the timetable, and he gave a lot of thought to it. He recommends that all the changes should be completed by 2019, but that other changes should take place at earlier dates—he specifies those dates in his work. The 2019 back-stop is appropriate, because that is the date when the international rules also need to be in place. We should not underestimate the huge amount of work to be done in this House to get the report turned into legislation that works and that people do not find ways around.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I am grateful to the Chancellor for plugging my book, but when he gets a chance to read it, I think that he will see that political parties on both sides of the House went along with the culture that led to some of the problems we had to deal with and that some of the shrillest voices calling for light-touch regulation were those of Members now sitting on the Treasury Bench. Will he tell us a bit more about what discussions he proposes having with other Governments, in view of the interconnected nature of the banking system, which is only as strong as its weakest part? Will he also deal with the erroneous assumption that there will never be a case in the future when a Government might have to bail out an investment bank? We should remember what happened to Lehman Brothers. It cannot ever be said that we will never have to do that again, even with a bank that is not thought now to be systemically important. I welcome the report, but it has to be seen as part of a wider range of reforms necessary to make our banking system stronger and more secure.

[Mr Osborne]

I respect the right hon. Gentleman’s experience of having been through all that he went through as Chancellor. He had to deal with these problems in real time over long weekends, and I have paid tribute previously to the work that he did on behalf of our country in those difficult months. As for his book, I have only just started reading it, but as far as I can see, I get off relatively lightly compared to the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown).

The right hon. Gentleman made a good point about the interconnectedness of the banking system. The Basel rules are significant, and I believe that that process was initiated when he was Chancellor and representing the United Kingdom. New arrangements have been agreed in record time. It took 10 years to come up with Basel II, but about 18 months to come up with Basel III. The international rules are important because they help us to deal with investment banks in foreign jurisdictions, such as Lehman Brothers, and to protect all globally systemically important banks and give them bigger cushions. As he well knows, new proposals are coming down the track for additional capital requirements on the most globally systemically important banks. That is significant. Also, we are putting in place the recovery-and-resolution ideas that, again, he initiated when he was Chancellor in order to ensure that we can deal with the failure of the UK end of an American investment bank. That will ensure that these banks do not just live internationally and die nationally, but that we can resolve any problems.

I would make a broader point, however. Yes, we have to do that at an international level, but we also have to consider regimes that have large concentrations of banking, such as Switzerland—let us, for a moment, leave aside Ireland and Iceland, which were obviously virtually bankrupted by what happened. It is interesting that Switzerland, which, as the right hon. Gentleman knows, is as keen as anyone to remain internationally competitive, has introduced its own domestic regime for its banks. It is wholly appropriate for us to consider doing that in this country while, of course, recommending to other countries changes that we think are sensible for all jurisdictions.