Independent Commission on Banking

Lord Lawson of Blaby Excerpts

Monday 19th December 2011 Lords Chamber

[Lord Lawson of Blaby]

My Lords, I warmly welcome the Government’s determination to press ahead without equivocation with the radical proposals in the Vickers commission report. My noble friend will be aware that ever since the banking crash of 2008 I have been campaigning for a complete structural separation of retail and investment banking. The proposals go a long way towards that, although not all the way.

I realise that there is a problem, which the Vickers commission recognised, that full enforced structural separation is probably contrary to European law, but, as I am sure that my Liberal Democrat friends would agree, that is not something that we should allow to stand in our way.

My concern is twofold. First, the top management of banks may be deficient in judgment and in some cases may be deficient morally, but they are certainly not deficient in well advised ingenuity. There is a real risk that they may find ways around the ring-fence if there is not full structural separation. Secondly, what we need is a cultural separation. We need to have a culture of prudence back again in retail banking, unlike the culture of adventure, if I may call it that, in investment banking.

I confess to my noble friend that I am concerned about the difficulty of having two totally separate cultures in one organisation. When this is in place it will be necessary, as the noble Lord, Lord Eatwell, said, at least to keep it under review all the time, although I think he is wrong in saying that we should keep the Vickers commission alive to do it. We should charge the Bank of England and the organisations that have been set up under the new regime with the responsibility of keeping this under close monitoring all the time, so we may need to go to full separation.

Finally, on the timing—I will confine myself to the ring-fencing—I am very glad that the ring-fencing legislation is going to come forward first, but there is bound to be a time lag because not only is the legislation complex but the banks will then need time to change and reorganise themselves to implement whatever the final decision of Parliament is in that legislation. I urge my noble friend to introduce the legislation not merely in this Parliament but in its next Session.