LIBOR (FSA Investigation)

Lord Darling of Roulanish Excerpts

Thursday 28th June 2012 Commons Chamber

[Mr Osborne]

I completely agree with the sentiments that my hon. Friend has expressed. I congratulate him and his Committee on acting swiftly to ask Mr Diamond to come and account for himself. As I said in my statement, we are looking at strengthening the criminal sanctions regime in general for market abuse and market manipulation, not just of LIBOR but in other parts of the market; and next week, as planned, the consultation on potential sanctions for directors of failed banks will be published. Sadly, the Government have been in this situation before with the FSA’s report into the failure of Royal Bank of Scotland, when the authority reported to us that it did not have the powers it would have liked to hold to account those responsible for the failure.

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

I am sure that, in his quieter moments, the Chancellor will reflect on the fact that we are kidding ourselves if we think that the UK was the only country where this sort of thing was going on. The American authorities are just as concerned as our authorities. The situation is symptomatic of a culture that prevailed for much of the last decade, when, frankly, anything was allowed to go.

Does the Chancellor accept two things? First, LIBOR now has to have some degree of independent supervision. It cannot be a work of fiction. It is so important, especially at times of financial crisis—in 2008, we were concerned about the financial health of Barclays and other banks—to know exactly what it is costing them to borrow. Secondly, although the FSA may not have criminal powers, I am pretty sure it does have powers to take out of banks and put off the road the people who are responsible for doing this, the people who tolerated it, and those gained from it and condoned it. If that is not done, we have no chance whatsoever to move on in what remains a very important industry for this country.

[Mr Osborne]

The former Chancellor is of course right: there was poor financial regulation in American markets too, and part of the investigation has been conducted jointly with the American authorities—but LIBOR was set in London, which is why it is called LIBOR.

The right hon. Gentleman raised two points. The regulation and supervision of LIBOR is precisely what we are investigating, although we have to make sure that we are not regulating the LIBOR market as it existed three years ago. That market today is somewhat different and changing quite a lot, so we have to get the regulation right for 2012, not for 2006-07. His second point was on the individuals concerned and the FSA’s powers. I have spoken to Adair Turner and I am absolutely clear that the FSA is pursuing cases against individuals, but it is a prosecuting authority and it would not be appropriate for me to comment about those individuals and ongoing cases.