Financial Services (Banking Reform) Bill

Debate between Lord Tyrie and Sajid Javid

Wednesday 11th December 2013 Commons Chamber

[Sajid Javid]

As I discuss the issue I will provide more information on how the measure could work, and perhaps the hon. Lady will judge for herself, given the situation she has in mind, whether the measure would have acted as a deterrent, and whether a prosecution could have taken place.

[Mr Andrew Tyrie (Chichester) (Con)]

First, I think it would be inappropriate to try to assess the impact of the proposed legislation on any specific case that has passed, and secondly, we are trying to devise legislation that will work for the future. I completely endorse what my hon. Friend the Member for Wyre Forest (Mark Garnier) has just said. We must emphasise that we expect a change and improvement in behaviour as a consequence of much more considerable risks and responsibilities being placed on those individuals than currently pertain with the approved persons regime and system of regulation.

[Sajid Javid]

I thank my hon. Friend for his comments. As Chair of the Parliamentary Commission on Banking Standards, he helps to explain the commission’s reasoning, which the Government share.

The introduction of this offence means that, as we have heard, in future those who bring down their bank by making thoroughly unreasonable decisions can be held accountable for their actions, which, as we saw in the recent financial crisis, can lead to severe economic disruption and considerable loss for taxpayers. In line with the commission’s recommendations, the new offence will be applicable only to individuals who are covered by the senior managers regime I mentioned earlier. Senior managers could be liable if they take a decision that leads to the failure of the bank, or if they fail to take steps available to them to prevent such a decision from being taken.

The offence will apply to behaviour that falls far below the standard that could reasonably be expected of a person in their position—that is similar, for example, to the test applied in corporate manslaughter. Importantly, the offence will apply to senior managers in banks, building societies and investment firms, and be subject to PRA supervision. That reflects concerns expressed by their lordships that the failure of systemic investment firms could lead to similar adverse consequences for financial stability, and that the taxpayer may have to bail out a collapsed retail bank. The maximum sentence for the new offence will be seven years in prison, and/or an unlimited fine. That reflects the seriousness that the Government, and society more broadly, place on ensuring that our financial institutions are managed in a way that does not recklessly endanger the economy or the public purse.

--- Later in debate ---

[Sajid Javid]

My hon. Friend will know that the Government have introduced many initiatives to increase competition in the banking sector. Just today we heard that Tesco Bank will enter the current account market next year, creating hundreds of jobs in Scotland. That is welcome news, and other innovations such as current account switching also help to engender more competition. I do not think any of us know what the situation might look like in the future, but I am sure a future Government will take that into account in 2020, and beyond, and see whether any further measures are required.

[Mr Tyrie]

The Treasury Committee and the Banking Commission are extremely grateful that the lion’s share of the proposals on competition have been implemented. We think that will be a step forward, and the Treasury Committee has been pretty active in that field for more than three years. As I alluded to earlier, one recommendation has not been acted on by the Government, and I would be grateful if the Minister explained why. Perhaps it can be best summarised in this way: what additional benefit is conferred by the FCA’s strategic objective that is not provided for through the operational objectives of the FCA?

[Sajid Javid]

My hon. Friend will know that the FCA currently has an objective to promote competition, and I know that he supports that. The Government have accepted the recommendation from the commission to give this secondary objective to the PRA, so those two objectives for the key regulators—the FCA and the PRA—will make a difference. If my hon. Friend has some further suggestions for the future, I will certainly take a closer look at them.

The FCA’s consumer panel, which represents the interests of consumers, is well placed to communicate its views to the PRA, and in the other place the Opposition have called for a role for the FCA’s consumer panel. Following constructive debates in the other place, I am pleased that the Government have been able to include amendment 156, which delivers the Government’s commitment to ensure that the FCA’s consumer panel can provide its views to the PRA effectively. This was warmly welcomed on both sides in the other place and by the chair of the consumer panel.

The amendments will simplify day-to-day operations for building societies, other banks and all the other entities that I have mentioned. They will enable banks and other institutions to compete on a more level playing field and improve things as suggested in the Bill and by the commission and others. I commend them to the House.

Royal Bank of Scotland

Debate between Lord Tyrie and Sajid Javid

Thursday 13th June 2013 Commons Chamber

[Sajid Javid]

I thank the hon. Gentleman for his comments. I will start with his final question, if I may. He asked why the Chancellor is not here. That is because I am here; I thought the hon. Gentleman would be pleased to see me. I could well ask him where his boss, the shadow Chancellor, is. If this is such an important issue for the Opposition, the shadow Chancellor might have turned up.

I was also hoping that I might get an apology from the hon. Gentleman and some recognition that the only reason we are here discussing this topic today is the previous Government’s failure to regulate our banking system, which led to more than £45 billion of taxpayers’ money being injected into bailing out a bank—the world’s largest banking bail-out.

Let me turn to the hon. Gentleman’s four questions. First, he asked about the sequence or the terms of Stephen Hester’s departure. I am pleased to confirm to him that the Chancellor has not been directly involved in meeting with Stephen Hester prior to the announcement —[Interruption.] He has not met with Stephen Hester prior to the announcement of his departure on this issue. This is a decision for RBS and its board. They have made the decision jointly with Stephen Hester and come to a voluntary agreement. The chairman of RBS, Sir Philip Hampton, asked to meet the Chancellor last week—at Philip Hampton’s request—to inform the Chancellor of the board’s decision, and that is what I would expect, given that the shareholder is the majority owner of the bank.

The hon. Gentleman also referred to the succession plans and asked whether it would have been better to find a successor in the first place. If he has looked carefully at the plans, he will note that Stephen Hester has agreed to stay on until a successor has been found or, at the very latest, until the end of this year. RBS has already begun its search process. I am confident that it will find a successor in time, but it is reassuring, as I said in my statement, that Stephen Hester is staying on in the meantime to help to smooth the process of finding his successor.

The hon. Gentleman also referred to the share price of RBS this morning. He will note that—I think I am right in saying—almost every major bank’s share price is down this morning. The stock market is down in general this morning. I suggest that the change in the RBS share price might also be a reflection of global stock markets, particularly Asian stock markets and markets in Tokyo, which, as it happens, also fell by 6% overnight.

Next the hon. Gentleman asked about the eventual sale of the bank and RBS’s comments about preparing the bank for its future return to the private sector. There should be nothing surprising about RBS having an ambition that the bank should be returned to the private sector. That is perfectly reasonable and perfectly normal. As for the Government’s plans, we have always made it absolutely clear that we have no target price when we are thinking about the return of RBS. We have no fixed timetable, and that includes the general election. Our major concern is to ensure, as the hon. Gentleman said himself, that when RBS is returned to the private sector, that is done with due regard to getting the best value possible for the taxpayer.

The hon. Gentleman also asked whether the value of the shares had been destroyed. I thought that was a bit rich, coming from him. He forces me to remind the House that when the previous Government carried out their bail-out following their failed policies and paid more than £45 billion for a stake in RBS, they overpaid by £12 billion above the share price. That amount was written off by the taxpayer at that moment, but that is something else for which we have not had an apology.

If I understood the hon. Gentleman’s last question correctly, he asked whether the Government had intervened in the decision-making process of the executive management. As I have said, those decisions are rightly made by RBS’s board. The Government’s shareholding is held through UKFI on an arm’s length basis. UKFI represents the interests of the taxpayer on RBS’s board. I remind the House that that arm’s length arrangement was deliberately set up by the previous Government; we have rightly kept it in place. UKFI reports periodically to the Treasury and provides advice, and we always take that into account when making our own decisions.

[Mr Andrew Tyrie (Chichester) (Con)]

The early work on RBS’s recovery needed an investment banker, and Stephen Hester has done a difficult job extremely well. He deserves all our thanks, and I hope that the whole House agrees with that. Does the Minister agree that, whatever further reforms of RBS are now implemented, arguing about the past—about the past price or about party politics—is not what the country wants to hear or what the economy needs in the months ahead? What we now need, as soon as possible, is an RBS that can fully support the hundreds of thousands of people who are trying to make a living in small businesses up and down the country but who cannot get the support that they need. They need an RBS that is fully functioning for the first time in many years.

[Sajid Javid]

I thank my hon. Friend, the Chairman of the Treasury Select Committee and of the Parliamentary Commission on Banking Standards, for his comments. He is absolutely right to praise the work of Stephen Hester and I agree wholeheartedly with his views on what Stephen Hester has achieved in his five years at the bank. Perhaps my hon. Friend had his work with the Parliamentary Commission in mind when he asked his second question. The approach must be bipartisan and we must keep the interests of RBS and the economy as a whole uppermost in our minds.

Loans to Ireland Bill

Debate between Lord Tyrie and Sajid Javid

Wednesday 15th December 2010 Commons Chamber

[Mr Tyrie]

I have no doubt that the Government are listening to my hon. Friend and others, who will put pressure on them to resist the pressure from other quarters. I agree with his point.

It seems to me that very little work is being done on the possibility of the euro crisis leading to more general examples of the no bail-out clause’s bluff being called. I would be surprised if there had been any such work. I cannot be sure, but it strikes me as highly unlikely. It is the Ark of the Covenant that the eurozone will continue indefinitely.

When the Chancellor came before the Treasury Committee, he assured us that eurozone members were

“having a discussion about the permanent eurozone bail-out mechanism.”

[Sajid Javid (Bromsgrove) (Con)]

Will my hon. Friend give way?

[Mr Tyrie]

I will not, because I am about to conclude.

Any new bail-out mechanism, however, may itself lack credibility in the absence of a common European fiscal policy. That is why the discovery that the no bail-out clause is a paper tiger will remain an enduring problem for the eurozone’s stability, a problem from whose consequences the UK will certainly not be immune.