Banking: Regulation

Lord McFall of Alcluith Excerpts

Monday 10th December 2012 Lords Chamber

[Lord Newby]

My Lords, I absolutely agree. That is why we have been in the forefront of bringing forward plans under which banking problems can be resolved and why, under the Banking Reform Bill, we are looking at having a ring-fence around retail banks so that we do not have the problems that we have had in the past. This will go ahead, whatever happens internationally. I hope very much that there will be international action, but action that is based very much on the British model and with British leadership.

[Lord McFall of Alcluith]

My Lords, Glass-Steagall, which governed the global prudential system, was more than 30 pages, Basel II increased that tenfold to 350 pages and Basel III is now 600 pages. Does this not tell us that the system is governed by complexity and opacity and that the desire to game it increases? Is there not a case for simplifying the system and having leverage play a greater role in the regulatory framework? The need for structural change, irrespective of what is happening elsewhere in the world, is urgent in the UK and we should get on with it.

[Lord Newby]

Yes, my Lords, I agree. Basel is indeed that number of pages, while I think that the Dodd-Frank Act in the States is more than 2,000 pages and is so complicated that there are real questions about whether the institutions will ever be able to implement it. Getting back to what I was saying about banking reform here, one of the key reasons for having a ring-fence is to have a simpler structure under which the retail bank is segregated from the more complicated and casino elements of the system. We think that that will bring benefits for consumers as well as bringing greater stability to the system as a whole.