Chris Leslie
Main Page: Chris Leslie (The Independent Group for Change - Nottingham East)Department Debates - View all Chris Leslie's debates with the HM Treasury
(11 years, 6 months ago)
Commons ChamberThis is a very serious setback for RBS on its road to recovery, and another stain on the reputation of UK banking. It is not just a case of excessive risk-taking by investment bankers; it is about the corrupt manipulation, until quite recently, of what should have been a trustworthy and independent index determining the inter-bank interest rate.
How much more evidence does the Chancellor need before he can agree to truly radical reforms for our banking system? Yet again, we have seen an appalling saga of interest rate fixing—not confined to one bank, but across the whole industry—but the Government still refuse to take a back-stop power for full separation in case ring-fencing does not work. Just what will it take for the penny to drop? Why will the Financial Secretary not accept fully what we have been saying since last year, namely that the Government must implement both the letter and the spirit of the Vickers recommendations and that we must see fundamental culture change? If that does not happen, the banks will need to be fully split up.
Those doing business with the banks will be astonished by these revelations. Will the Financial Secretary explain in simple terms how ordinary companies and customers with mortgages or savings linked to LIBOR will ever find out if they have been fleeced as a result of this fraudulent activity? If those customers have lost out because of LIBOR rate rigging, how and when will they get their money back?
Despite the Financial Secretary’s claim that the Government reacted swiftly, does he regret not getting ahead of the scandal as it emerged last year? On LIBOR, I asked his predecessor, the hon. Member for Fareham (Mr Hoban), during a Financial Services Bill Committee sitting last March whether the Government had a view about whether there was manipulation and whether changes needed to be made to the regulatory arrangements. He stood up and answered with the single word: no. The Treasury has, of course, come to regret that stance and, several months later, this tremendous scandal began to leak out.
Will the Financial Secretary update the House on the process for extricating the LIBOR setting process from the British Bankers Association and when an independent and more transparent arrangement will be secured? Was not the 2012 Act a missed opportunity, not just because it failed to widen the regulatory perimeter to cover LIBOR, but because it left doubt over whether regulators can prevent benchmark rigging in other trades, such as the gas and electricity markets, commodities, metals and oil? Rather than wait for Europe to legislate, the UK Government need to wake up and take preventive steps now. We will table amendments to the Financial Services (Banking Reform) Bill in the coming weeks.
Does the Financial Secretary agree that we also need new rules to protect whistleblowers who highlight failures inside the banks, and that we must ensure that offences created to punish misleading statements also properly cover the foreign operations of our UK banks? The Financial Secretary has said that the large fines for RBS will be clawed back in part from the bank’s bonus pots, but is it not now clear that fundamental changes are needed to the pay and bonus culture across the banking sector, including a repeat of the banker bonus tax to pay for opportunities for young people across the country? The Business Secretary said this morning that he has a plan for the RBS shares owned by the taxpayer. Does the Financial Secretary agree or disagree with that? What exactly is the Government’s policy on the future plans for the RBS shareholding?
Taxpayers and bank customers are growing sick and tired of being let down by the banks day after day. Does this not all boil down to a question of trust—a question not only of whether British customers can trust their banks, but of whether investors across the world continue to trust their money with the City of London more than with other financial centres? Britain’s financial services reputation is on the line. Our economy needs a healthy and sustainable banking sector, so we must rapidly clean up the system and put UK financial services on the path towards respectability, integrity and professionalism.
It is, of course, right that we do that. I have been very clear that we are taking the steps that we are taking to restore the international reputation of the City and to make it pre-eminent in the world as a place in which people have confidence.
I would have thought that the hon. Gentleman would have taken this opportunity to reflect on the contribution that the previous Government made to the decline in the reputation of the City. It is not as if the chaotic regulatory regime was not foreseen. In November 1997, during the passage of the legislation that set up the flawed Financial Services Authority, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) said:
“The coverage of the FSA will be huge; its objectives will be many, and potentially in conflict with one another. The range of its activities will be so diverse that no one person in it will understand them all.”
He went on to say that the Government of the day
“may, almost casually, have bitten off more than they can chew. The process of setting up the FSA may cause regulators to take their eye off the ball, while spivs and crooks have a field day.”—[Official Report, 11 November 1997; Vol. 300, c. 732.]
That was the warning that the Conservative party gave the Government at that time, but it was ignored comprehensively for their 13 years in office.
We have moved quickly, as most reasonable people would concede. We already have a Financial Services Act on the statute book and we have set up an eminent commission chaired by Sir John Vickers to recommend far-reaching changes to the financial services system. The previous Government’s contribution to the eminence of the City was to knight Fred Goodwin, for heaven’s sake. The Opposition spokesman brags about the reforms to the regulatory system that he recommended in a Public Bill Committee, but it was the shadow Chancellor, when he had my job, who said that
“nothing should be done to put at risk a light touch, risk-based regulatory regime.”
We are making the reforms that it falls to us to make.
I will answer some of the specific points that the hon. Gentleman made. We will have discussions about the Financial Services (Banking Reform) Bill. Most reasonable people would conclude that the reforms that we are making, with the advice of the Vickers commission and the Parliamentary Commission on Banking Standards, lead the world in this area. The Liikanen report, which is being recommended at a European level, explicitly refers to the reforms that we are contemplating. It is right that we should be ahead on this.
The hon. Gentleman is right that the Financial Services Authority must investigate whether any individuals or firms lost out as a result of the attempted manipulation. I call it attempted manipulation because we are talking about the rates that were submitted and it is not necessarily the case that the LIBOR reference rate changed in response. However, it is right that the FSA should make that assessment.
The process that Martin Wheatley recommended to replace the BBA is under way. It will become a regulated activity as soon as the statutory instruments are passed. Baroness Hogg and her committee are setting up a process to invite tenders, which will not include the BBA, to administer that process. As Martin Wheatley said, it is necessary that that is done in a way that does not undermine confidence in the rate-setting process during the transition, because it is fundamental to many contracts, as the hon. Gentleman implied, including people’s mortgages.
The hon. Gentleman mentioned other benchmarks. The powers that we took in the amendments that we made to the Financial Services Act 2012 before Christmas allow us quickly to specify any other benchmarks that might be subject to such abuse. Our response has been co-ordinated with the international authorities and nobody regards the powers that we have as inadequate to the task of dealing with other abuses.
On whistleblowers, the hon. Gentleman is right that it is important that people within banks and financial services should have the confidence to report abuse. A very small number of people are responsible for something that is besmirching the reputation of many millions of people up and down the country who work hard, day and night, for banks. Those people have had reason, over the years, to be proud of their career. It is important, not least for those people, that the institutions for which they work recover their reputations.
On the shareholding in RBS, it is of course the Government’s intention to return it, at the appropriate time, to private ownership. It is not right that we should own such a significant stake of a high street bank. It was necessary for us to do so because of the crisis that the hon. Gentleman and his colleagues know all about. As soon as it can be returned to independence, the better.