Banking (Responsibility and Reform)

Debbie Abrahams Excerpts

Tuesday 7th February 2012 Commons Chamber

[Mr Umunna]

I presume that my hon. Friend is referring to the Joint Committee that considered the Financial Services and Markets Act 2000. The consensus at the time was shown in the approach instilled in the Act, and we are now revisiting the regulation of the sector.

The crash was global in nature, and the causes cited by the Independent Commission on Banking include declining underwriting standards, the mispricing of risk, a vast expansion of banks’ balance sheets and rapid growth in securitised assets—in short, gross irresponsibility. The commission also stated in its report that one problem was that some bank employees were remunerated

“on the basis of reported profits that were neither time-adjusted nor risk-adjusted, and led to employee incentives that were not always aligned with the long-term interests of the bank.”

The US financial crisis inquiry commission established by President Obama, which reported last year, went further, stating:

“Compensation systems—designed in an environment of cheap money, intense competition, and light regulation—too often rewarded the quick deal, the short-term gain—without proper consideration of long-term consequences. Often, those systems encouraged the big bet—where the payoff on the upside could be huge and the downside limited.”

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Does my hon. Friend agree that we should not demonise one group in society, whether they be bankers or benefit claimants? This is about fairness. We know from recent evidence that fairer societies are better for everybody, improving life expectancy and increasing social mobility. We should use that evidence to inform policy that is principally about fairness.

[Mr Umunna]

I completely agree with my hon. Friend.