Financial Services (Banking Reform) Bill

Debate between Emily Thornberry and Ian Swales

Wednesday 11th December 2013 Commons Chamber

[Ian Swales]

I will keep my remarks relatively brief. Neither of the two major parties has too much to crow about in this area, because the regulatory system is a product of both their Governments over time. However, at least this is one area where the Leader of the Opposition and the shadow Chancellor have said sorry for something they have left behind.

I am pleased with the work done by the Banking Commission, and I pay tribute to my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) and my colleague Baroness Kramer for the work they have done on it. I am delighted that the Government have, perhaps kicking and screaming, at last agreed to adopt the vast majority of the proposals. I am particularly delighted that the Bill puts in place powerful measures on ring-fencing, as the Liberal Democrats have been arguing for that for years. Not only was it in our 2010 manifesto, but it was on the front page, so I am pleased to see it happening.

The background to this is clear: taxpayers should not be held to ransom by these giant organisations, particularly for high-risk activities—casino banking, as it is sometimes called. We must also remember that a lot of these institutions are highly international, so the UK taxpayer is having to stand behind organisations that have a lot of activities overseas—that, too, does not seem right. So it is good that all these measures are being introduced.

We have seen banks that used to be on the side of customers, both individuals and businesses, increasingly behave very much on the side only of themselves. We have seen scandals involving payment protection insurance, LIBOR, foreign exchange and interest rate swaps, which is the one I particularly wish to highlight. I made a speech on that a few weeks ago in this House. I said that the banks appeared to be moving at a tortoise-like pace when we were not having debates and suddenly acted like hares for a few days when we did have them. I can report that they have become tortoises again since that debate a few weeks ago. Constituents of mine who were expecting repayments in very quick time are still waiting, so I hope the Minister will keep the pressure on, although that is not strictly relevant to today’s debate. We have also seen the Co-op bank scandal and predatory activity by banks in the corporate restructuring area—that is the current scandal and I am sure we have a lot more to hear about it.

The Government have been acting on matters such as transaction levies, and making sure that fines for institutions leave the industry and do not just go around in a magic circle. The current round of fines is being used to help pay for the military covenant, which has to be a great idea. The Secretary of State for Business, Innovation and Skills, my right hon. Friend the Member for Twickenham (Vince Cable) is trying, although it is sometimes a lonely furrow, to do something about high pay: shareholders are being given binding votes on their company’s pay policy; companies are being forced to publish single figures for executive deals; and companies are being encouraged to inject more diversity by hiring non-executives from a broader pool of academics, public servants and lawyers. So, to a limited extent, the Government are trying to do something about that.

I particularly wish to discuss Lords amendment 41, which deals with professional standards. A joke doing the rounds when the banking crash happened named the four chairs of the big banks and asked which of them and Terry Wogan had a banking qualification. Of course, the answer is Terry Wogan and none of the others. That illustrates that for too long we have had under-qualified people in important positions. The hon. Member for Bolton South East (Yasmin Qureshi), who is not in her place, was talking about the legal, medical, pharmaceutical and accountancy professions, which have professional standards of the type she would like to see. However, it is important to note that those standards are not set and regulated in this place; they are set by the professions themselves, which have a huge vested interest in ensuring their own high reputation. Those professions also carry out much more specific and autonomous work in terms of knowing whether an individual has transgressed or not. It is much more difficult in large organisations with long decisions chains to say who is actually responsible for each individual activity. However, I urge the banking profession to think a lot more about how it can enhance its reputation, which, let us face it, is pretty much at rock bottom at the moment. It should think, “How can we have professional standards which are enforced? How can we ensure that people are kept up to date with continuing professional development and that people will be struck off?” However, that is increasingly a role for professional bodies such as the Chartered Banker Institute to be thinking about; it is not something for legislation in this place.

I welcome the work of the Banking Commission and the Government’s response to it. I welcome the extra powers that regulators are going to have as a result of this legislation, but the onus is on them to use those powers. I would like the Minister to say, at some point during today’s debate, how we are going to scrutinise the regulators to make sure that they use their new powers to their full extent.

[Emily Thornberry]

It has been said that one of the great innovations of this Bill is the introduction of the offence of reckless banking. It is not beyond our imagination to think that in 2015 the measure will be promoted on many a doorstep by people who perhaps do not fully understand what it is that is being introduced. It is one of those proposed offences that promises a great deal, but delivers very little indeed. There is nothing like it in existence in English law, and I will go on to explain why that is in a moment.