Banking Reform

Andrew Love Excerpts

Thursday 14th June 2012 Commons Chamber

[Mr Hoban]

We have considered Sir John’s recommendations carefully, including the cost on banks, the economy and business, but we felt it was in the interest of business to ensure that a wider range of products could be sold within the ring fence, including complex ones such as derivatives. We set out, in our cost-benefit analysis, to look at the cost of the package as a whole, not to break it up into particular areas. I am confident, however, that we will have a more stable banking system in a position to lend to business on a more sustainable basis. Through these reforms, we hope to increase competition in the banking system, which is in the interests of small businesses and will help to improve competition on price. I think, therefore, that this is a good package for businesses and will ensure the stability of the economy.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Next Thursday, there will be a debate in the House on the mis-selling of derivative and hedging products to small businesses, yet the Minister has announced that these will be allowed inside the ring fence. His excuse is that there will be stricter regulation, but are these not high-risk products that should not be mixed up with deposits in retail banks?

[Mr Hoban]

The hon. Gentleman follows these matters carefully. I do not know whether he, like me, has a fixed-rate mortgage, but that is actually a form of derivative. These products are widely used and there is a need for them. It is in the interests of businesses that such products be within the ring fence—it will provide much more control over their sale—although it is important to supervise properly the conduct of the banks selling them. The Financial Conduct Authority is well placed to provide that supervision, and with the tougher powers we have given it, that supervision will apply not only to retail customers but to business customers.