Financial Services (Banking Reform) Bill

Greg Clark Excerpts

Monday 11th March 2013 Commons Chamber

[The Financial Secretary to the Treasury (Greg Clark)]

I beg to move, That the Bill be now read a Second time.

The Bill has a simple objective at its heart, which is to answer what the Chancellor has called the British dilemma: how can Britain be one of the world’s leading financial centres without exposing ordinary working people in this country to the terrible costs of banks failing?

Let me illustrate both sides of the dilemma. The financial services sector is one of our most important industries. Together with related services, it employs around 2 million people in this country, two thirds of whom work outside London. Even in the recession, financial services contribute about £1 in every £8 of government revenue to pay for public services. The industry is by far our biggest exporter, generating last year a £47 billion surplus from overseas trade and providing us with vital foreign exchange earnings.

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

The Chancellor is on record as saying that this is a critical piece of legislation if we are to get the banking system right, yet he chooses not to appear before us today. There has been no explanation of why the Chancellor is not in the Chamber. Could the right hon. Gentleman give us one?

[Greg Clark]

I should have thought it was reasonable for the Financial Secretary to the Treasury to introduce a Bill on financial services.

Let me continue to make my point. The financial services sector is of great importance to Britain, but that importance carries risks for this country. At their peak, the banks’ balance sheets amounted to 500% of UK GDP, compared with 100% in the US and 300% in France and Germany. In 2008, for example, the Royal Bank of Scotland was the biggest bank in the world and, as we all know, Britain also witnessed the first bank run for more than a century, with depositors queuing in the streets to get their savings out of Northern Rock. RBS and HBOS had to be bailed out, with £65 billion of taxpayers’ money needed to shore up the banks.

The system of regulation failed, as did the culture of the banking sector, in not preventing and resolving the crisis without recourse to taxpayers’ money or otherwise putting people’s deposits at risk. That is why fundamental reform was needed, the first pillar of which has been put in place through the passage of the Financial Services Act 2012, which received Royal Assent in December and establishes a clear and distinct role for prudential regulation and conduct regulation, a role that was blurred and ineffective.

The Bill is the second pillar of those reforms and it reflects the considered views of no fewer than two expert commissions. The first, chaired by Sir John Vickers, was the Independent Commission on Banking, whereas the second, chaired by my hon. Friend the Member for Chichester (Mr Tyrie), was the Parliamentary Commission on Banking Standards, on which many Members of the House have served.

Let me say something about the process we followed, briefly summarise how the Bill reflects the recommendations of each commission and then explain in some detail the rationale for the few remaining areas in which the Government’s proposed approach differs.

[Alison McGovern (Wirral South) (Lab)]

In his discussion of the process, will the Financial Secretary explain why, given that the crash in 2008 to which the Bill is a response was one of the most momentous economic events in my lifetime and the lifetimes of many people, and given the importance of its proposals, the Chancellor did not see fit to lead the debate today?

[Greg Clark]

I am disappointed that my presence here does not satisfy the hon. Lady. The Chancellor trusts his Financial Secretary to speak at the Dispatch Box. I do not know how it is in the Opposition.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Will the Minister at least tell us where the Chancellor is? Is he watching on television? Is he doing some shopping or knitting? What is going on? Where is the Chancellor right now?

[Greg Clark]

I should have thought that the hon. Gentleman would reflect on the fact that the Chancellor has many serious responsibilities and he is discharging them at the moment.

Let me talk about the process that we have followed, then I will address in some detail the particular aspects of content. The process that we have followed has sought to come up with the best possible way to address the dilemma that I described, and to do so by building, as far as possible, a broad consensus. That may not be there—yet—on every particular, but I think most Members would concede that Sir John Vickers’ commission has come closer to achieving that than many people thought possible.

The Independent Commission on Banking was established as soon as possible after the general election, in June 2010. It took extensive evidence before publishing an issues paper in September 2010 and an interim report in April 2011, on which it consulted, before publishing its final report in September 2011. The Government gave, and consulted on, an initial response in December 2011, before issuing a White Paper for consultation in June 2012. In the light of the responses to the consultation, a draft Bill was published last October and the Parliamentary Commission on Banking Standards was asked to subject it to pre-legislative scrutiny. The parliamentary commission’s report was published on 21 December last year and many of its recommendations were accepted in the Bill published in February and laid before the House.

At the time of introduction, I made it clear from the Dispatch Box that we would table further amendments in response to the commission’s future recommendations as the Bill proceeds through both Houses. I hope that Members on all sides would agree that this has been an exceptionally extensive process of both policy development and scrutiny of emerging proposals, and I repeat what I said to the right hon. Member for Wolverhampton South East (Mr McFadden) last month, that I will personally insist on taking a constructive and open-minded approach to the views of this House throughout the Bill’s passage. To the extent that the Bill reflects the unanimous views of Parliament, it is immeasurably strengthened.

[Kelvin Hopkins (Luton North) (Lab)]

Does the Minister accept that one of the major factors in the 2008 crisis was the complete failure of the auditing sector to get a grip on what banks were doing? Will he be putting forward proposals for strengthening audit for the future?

[Greg Clark]

That was not a set of particular recommendations in the reports that were commissioned, but I know that it is of some interest to members of the parliamentary commission and, as I will go on to say, we stand ready to consider their further recommendations, and I dare say they might have something to say in that respect.

[Chris Leslie]

I want to pick up on the Minister’s statement that he wants to take this parliamentary process seriously and listen to the debates. If that is the case, why on earth has he ignored the clear recommendation of the Parliamentary Commission on Banking Standards that there should be a three-month gap between the publication of the Bill and the Committee stage in the House of Commons? We will not have a Committee stage at a time when we can fully take account of the final recommendations of the commission. Is that not totally contemptuous of the Commons parliamentary procedures? Perhaps that is why the Chancellor has not turned up for the debate.

[Greg Clark]

I just said that I intend to be constructive and to pursue the approach that we have taken. If the hon. Gentleman will be patient, I will respond shortly to that particular recommendation.

Let me summarise the principal contents of the Bill where they reflect the advice of one or both of the commissions, before I set out the areas in which we take a different view. One of the central recommendations of the Independent Commission on Banking is that the UK banks should ring-fence

“those banking activities where continuous provision of service is vital to the economy and to a bank’s customers.”

That recommendation has attracted widespread support, and the Bill creates the basic architecture of the ring fence by making it an objective of the regulator—the Prudential Regulation Authority and, if necessary, the Financial Conduct Authority—to secure the continuity of core services by preventing ring-fenced bodies from exposing themselves to excessive risks, by protecting them from external risks, and by ensuring that, in the event of failure, core activities can carry on uninterrupted, the so-called resolution objective. The core activities are defined, as recommended by Vickers, as the taking of retail and small and medium-sized enterprise deposits and overdrafts, but they can be added to if required through secondary legislation.

In response to the parliamentary commission’s recommendations, the Bill is now clear that to be ring-fenced means that the five so-called Haldane principles of separation should be followed, namely that the ring-fenced bodies should have separate governances, including boards; remuneration arrangements; treasury and balance sheet management; risk management; and human resource management. As the parliamentary commission has also recommended, directors of banks will be held personally responsible for ensuring that the ring-fence rules are obeyed. The parliamentary commission also made a recommendation that the ring fence should be electrified. That is to say that, if the rules are breached, the banks should be forcibly split.

While the Bill is before the House, the Government will bring forward amendments to provide a power to require the full separation of a banking group, where, in the opinion of the regulator and the Government, such separation is required to ensure the independence of the ring-fenced bank. As hon. Members know, the parliamentary commission made a further recommendation for a power to trigger separation of the entire system, which I will come to shortly.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

How confident is the Minister that over the coming years the all-powerful financial lobby will not water down the ring fence and return to a business as usual scenario?

[Greg Clark]

That is a principal source of concern. Sir John Vickers, the author of the report, has given evidence in public that he is confident that the arrangements are robust, but we reflected on one of the recommendations of the parliamentary commission to provide this electrification so that there are consequences for a bank that tries to game the system. That is right and it is a valuable contribution from the commission.

[Mr Andrew Tyrie (Chichester) (Con)]

Sir John Vickers has in evidence to us also endorsed in full our proposals for electrification, part of which the Government are rejecting.

[Greg Clark]

I will deal with the important recommendation made by my hon. Friend’s commission very shortly.

For the sake of completeness, let me summarise the Bill’s other main provisions.

[Stewart Hosie (Dundee East) (SNP)]

The Minister said that electrification would work because the regulator—the PRA or the FCA where a financial institution is not PRA-regulated—will be given the power to ensure core services. Does he see any issues arising if the PRA and the FCA perhaps take a different approach to what they might do to the same institution? Is there a concern about two different regulators looking at different institutions on the same matter?

[Greg Clark]

The hon. Gentleman makes an important point, which we considered in drafting the Bill. We would expect all of these activities and institutions to be regulated by the PRA. The FCA was included in the Bill as a means of ensuring that if some other activities were to take place in the future—although we do not envisage that happening—it would not be necessary to come back to the House. That is our clear intention.

Let me summarise what the Bill does include before I go on to talk about what it does not. As proposed by the independent commission, the Bill provides that deposits protected by the Financial Services Compensation Scheme—the deposits of individuals and small businesses up to £85,000—will be preferential debts in insolvency. The Bill provides the regulator with the power to require ring-fenced banks to maintain a buffer of at least 17% of what is referred to as the primary loss absorbing capacity—that is, equity, other non-equity capital instruments, and debt that can be written down or converted into equity in the event that a bank fails. This allows losses to fall on the bank’s wholesale creditors—sophisticated financial investors—rather than on ordinary taxpayers, as was the case with RBS.

A legitimate question arises as to whether additional loss absorbency requirements should apply, in an international financial centre such as the United Kingdom, to the overseas operations of UK-based global banks. This has been much debated in the House, both before the parliamentary commission and elsewhere. It is obviously right that where the overseas businesses of a UK-based bank could pose a threat to UK financial stability, or to the British taxpayer, that bank should issue loss-absorbing debt against the entirety of its group operations. Equally, where overseas units do not pose such a threat they should be exempt from loss-absorbing debt requirements, not least to avoid creating a false impression that the UK somehow stands behind those overseas businesses.

The question that has exercised the commission is this: who should decide? The Government have listened to the Financial Services Authority and the parliamentary commission on how that should work. We agree that the requirement should follow the strategy for managing the failure of each group, known as the resolution strategy. Where a UK parent company will provide support to resolve failing overseas operations, the regulator must ensure that the parent company issues loss-absorbing debt against the entire group. However, where a bank’s overseas subsidiaries would be resolved locally by overseas regulators without reliance on the UK parent, the parent company should not be required to issue loss-absorbing debt against those overseas subsidiaries. Crucially, it will not be the bank’s call but the decision of the regulator and the Treasury as to whether group primary loss-absorbing capacity—PLAC—should be held.

[Mr Love]

Of course, the UK regulator will have to know whether the third-country regulator will accept responsibility for the subsidiary. How does the Minister intend to ensure that the UK regulator can be reassured that the third-country regulator will accept responsibility for the subsidiary should it get into trouble?

[Greg Clark]

The hon. Gentleman is absolutely right. That will be one of the requirements—the regulator, and indeed the Treasury, will need to be satisfied by the bank that the overseas regulator has accepted, and credible arrangements are in place, to ensure that no liabilities will fall on the UK taxpayer.

[Mr Tyrie]

I apologise for interrupting the Minister a second time. Just to be clear, will it be the regulator or the Treasury that will ultimately decide what constitutes adequate PLAC? A moment ago he referred to the regulator and the Treasury. Which will it be?

--- Later in debate ---

[Greg Clark]

The resolution plans have to be agreed between the regulator and the Treasury, so both will have that responsibility.

[Stewart Hosie]

Just to get some clarity on the previous point about the relationship with overseas regulators, if both the Treasury and the regulator are required to be convinced of the plan, how will that work in the relationship with, say, the single supervisory mechanism in Europe? Will it, too, not be required to be convinced, or at least will discussions not have to take place, to determine first where liability might lie and then whether the resolution plans are adequate?

[Greg Clark]

The reason for arranging this through the resolution plans is that they should be agreed in advance and everyone should be clear who will be responsible. It is no good the Treasury or the regulator in this country thinking that an overseas jurisdiction will pick up the bill if they were actually blissfully ignorant of it, so the hon. Gentleman is absolutely right that there has to be that clarity.

As I promised on 4 February, I have provided Parliament with drafts of the principal statutory instruments so that the House, while scrutinising the Bill in detail, can understand more clearly how the powers that the Bill grants are intended to be used. As a further aid to scrutiny, I will also make available to the House, in advance of consideration in Committee, a so-called Keeling schedule giving a consolidated text of those parts of the Financial Services and Markets Act 2000 that will be amended by the Bill, including the amendments the Bill will make.

Let me turn to some of the relatively few recommendations of either the Independent Commission on Banking or the parliamentary commission on which the Government have not been persuaded. There are four main areas to consider. The first is the timing of scrutiny, which the hon. Member for Nottingham East (Chris Leslie) mentioned. I hope that hon. Members will accept, from the process I described earlier, that these proposals have already benefitted from an exceptional degree of consideration, both in the amount and, if I may say so, in the august quality of its scrutineers. It will soon be three years since the Vickers commission began its work, and it is less than two years until all the secondary legislation must be enacted if this work is to be completed in this Parliament, as I think we all hope it will be. The Bill is comparatively short—20 clauses— and the time envisaged for its Committee stage is not unreasonable for consideration of all the amendments proposed by the parliamentary commission in its report published today.

However, I know that the parliamentary commission has other advice to give, and I welcome its commitment to produce its final report by the middle of May. Once we have received the commission’s advice, we will of course want the chance to be able to take it. I therefore give this commitment: subject to the usual channels, I will make sure that this House has enough opportunity to consider and debate whatever further recommendations the commission makes in its final report.

[Mr Love]

I thank the right hon. Gentleman for that commitment. Another issue that made life more difficult for the parliamentary commission was the lack of any knowledge of the delegated legislation that he has said will go through the House. Will he give some indication as to when that will be published so that although the parliamentary commission might not have that information available to it, the Public Bill Committee may?

[Greg Clark]

I am grateful for the hon. Gentleman’s point. As I said, I have published some of the principal statutory instruments and more will be available before the Bill goes into Committee. I will make sure that the House has access to the principal measures; as he knows, minor measures will sometimes follow. I repeat that it is absolutely my intention that the Bill should be properly considered and scrutinised by this House. The strength of these arrangements will benefit from their being exhaustively considered and enjoying the full confidence of the House.

[Mr Tyrie]

I apologise for interrupting for a third time, but I want to clarify the scrutiny question. The Government intend to get the Bill out of Committee before the date that the Banking Commission had proposed that it should go into Committee. Therefore, this all boils down to how much time we are going to get on Report. Will the Minister now, at the Dispatch Box, give a commitment to two days on Report?

[Greg Clark]

I cannot do that, but I repeat my commitment that this House will have the opportunity fully to consider the amendments proposed by my hon. Friend’s commission. He has not yet produced his report, so we do not know what he has in mind, but I have been as clear as I can at the Dispatch Box that there is no intent to avoid scrutiny; quite the opposite.

[Chris Leslie]

The Minister talks in very emollient tones, because he likes to sound moderate, but this is a series of instances of contempt for the House of Commons’ powers and our ability to scrutinise the Bill. The Government ignore the recommendation of the parliamentary commission, they then try to whisk the thing out of Committee before we have even had a chance to consider the recommendations of the commission, and now, when asked for a mere two days on Report, the Minister will not even give that commitment. The Chancellor is not here, either. In what seriousness do the Government hold this Bill? There is a sense that it is just part of a rubber-stamping exercise for them.

[Greg Clark]

The hon. Gentleman will discover that through our debates in Committee he will have plenty of opportunity to scrutinise the Bill. When we have the commission’s recommendations, if we think that they need more than a day on Report then I will make the case for that. Whatever happens, I will ensure that this House has the opportunity fully to consider these matters.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I am afraid that I want to press the Minister further on the same point. He said that the Government would ensure that there was full consideration in this House of further recommendations from the Parliamentary Commission on Banking Standards, yet the timetabling motion that he will move later says:

“Proceedings in the Public Bill Committee shall…be brought to a conclusion on Thursday 18 April”.

That is before the date of the parliamentary commission’s final report. How meaningful will be his commitment to full consideration of those proposals, given that he is rushing the Bill through Committee before the commission, which I remind the House was set up by the Chancellor, has even issued its final report?

[Greg Clark]

The right hon. Gentleman will find that he is satisfied with the scrutiny that is available. It is a question of chickens and eggs. We have not yet had the recommendations of the commission, on which he serves. When it makes its recommendations, if we think that they require more time then we will certainly make sure that there is plenty of opportunity for the House to scrutinise these matters.

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

Will the Minister give way?

[Greg Clark]

I will give way for the last time.

[Ed Balls]

I remind the Minister that, around the time of the LIBOR scandal a year ago, a serious proposal by the Opposition for a full, open public inquiry into these issues was rejected by the Chancellor in favour of a parliamentary commission. The commission’s recommendations on process as well as substance and the House of Commons’ scrutiny of its recommendations —which will not even have been made by the time the Committee stage is complete—are being treated in a way that is very much against the spirit of the Chancellor’s announcement last summer, when he rejected a full public inquiry. If the Minister can get hold of the Chancellor before the vote at 10 pm, he should tell him that the Government should reconsider the contemptuous way in which they are treating the House of Commons and the all-party parliamentary commission of both Houses. It is not in line with the spirit of the discussions that the Chancellor had last summer with the chair of the commission, the hon. Member for Chichester (Mr Tyrie).

[Greg Clark]

The right hon. Gentleman will find that he will be perfectly satisfied with the degree of scrutiny that the recommendations, which have not yet been made, will receive. I have made that commitment and he will see it in time, even if he is not very trusting at this stage. I hope he will change his view.

One of the parliamentary commission’s policy recommendations was for a general reserve power to split up the entire banking system if it were considered to be appropriate in future. The Chancellor, the chairman of the commission—my hon. Friend the Member for Chichester—and, indeed, the Archbishop of Canterbury had a learned and erudite discussion about the origin of the sword of Damocles metaphor. The Government’s view is that such a power would, in effect, introduce a different policy—one that was considered and rejected by the Independent Commission on Banking, which concluded that full separation would have higher costs for a gain

“that might not even be positive”—

without anything like the three-year period of scrutiny and analysis that this policy has enjoyed.

The proposal would, in effect, legislate for two policies at the same time—ring-fencing and full separation. We must legislate for the policy that the Vickers commission proposed. If a future Government were to consider that ring-fencing was no longer the right solution—which they would be perfectly entitled to do—they should conduct a full analysis of the case for alternative reforms and, in the light of that analysis, introduce new legislation to Parliament.

In addition, the parliamentary commission has proposed that the exercise of the reverse power by the Prudential Regulation Authority should include safeguards, including a Treasury veto, to ensure that the regulator behaves in a non-discriminatory way. The Government agree that there should be such a veto and will table an amendment to provide for a firm-specific power to require separation while the Bill is before the House. In addition, a further safeguard is available for any bank that believes it has been treated unfairly—namely, recourse to the courts.

One very important point that both the Vickers commission and the parliamentary commission agreed is that, in addition to the enhanced capital requirements on ring-fenced banks, there should be a minimum leverage ratio and that it should apply to unweighted assets of 4.06%, rather than the Basel III standard of 3%.

Let me be clear: this Government support the introduction of a minimum leverage ratio. It provides a simpler measure than risk-weighted assets, the calculation of which can be complex and disputed. Furthermore, it has been established empirically that a rise in the leverage ratio often preceded credit booms in this country and overseas.

The question remaining is about the precise level of the leverage ratio. I referred earlier to the British dilemma of how to maintain an internationally competitive financial sector without imposing risks on domestic taxpayers. This is a case in which that dilemma is, to be frank, most acute. When it comes to capital requirements, international agreements have already established that different countries will have different requirements. The European Union capital requirements directive, CRD4, provides for member states to have discretion to go beyond agreed capital requirements.

In the case of the leverage ratio, the 3% Basel III recommendation was for the requirement to be binding only from 2018, and it is not clear yet whether there will be the flexibility in European law to increase it as Vickers and the parliamentary commission recommend. The Vickers commission did not recommend that the higher leverage ratio should apply before 2019, in order, for reasons that I think we all understand, to minimise the impact on lending in the short term while the economy is still recovering.

Furthermore, during our repeated consultations, concerns have been raised by institutions such as building societies that they could be caught by a 4% leverage ratio despite having a relatively low-risk portfolio of assets, thereby restricting lending to home owners. Moreover, it would lead to assets in Spanish property, for example, being viewed as equal to US Government bonds for the purposes of the calculation. Our view, therefore, is that at this time we should follow the international approach and press for countries to have power to set a higher ratio from 2018, following a review in 2017.

Having said that, in the interests of transparency, we agree with the recommendation of the Financial Policy Committee that banks should disclose their leverage ratios from 2013. I confirm that they will do so from this year.

[John Mann (Bassetlaw) (Lab)]

Does the Minister perceive there to be a problem for very small building societies, because they are more disadvantaged than large institutions and could be swallowed up, thereby reducing competition in the market rather than increasing it?

[Greg Clark]

I have taken to heart the need to allow into the market smaller players, whether they be building societies or banks. I will say something about that shortly which I hope will satisfy the hon. Gentleman.

[Mr McFadden]

I suggest to the Minister that he has just ducked the British dilemma that he set out at the beginning of his speech by saying on the one hand that we have a huge financial services sector, but on the other hand that we are going to go at the speed of the slowest ship out of Basel on the capital and leverage rules. Is not the proper response to having a huge financial services sector relative to our economy to ensure that we have adequate rules to protect the UK taxpayer, rather than always going for the lowest common denominator internationally on such standards?

[Greg Clark]

I think that the right hon. Gentleman would concede that what Vickers recommended will advantage us and protect the British taxpayer in a number of respects, including through ring-fencing and higher capital requirements. We are already doing those things. He will know that Vickers did not recommend an early increase in the leverage ratio. I have been candid with the House that we would like to see one. However, in line with what Vickers advised and given the discussions that are taking place in other jurisdictions, we think that it is right to have the consideration in 2017, with a view to introducing the higher leverage ratio later.

[Mr Love]

The Minister said earlier that capital requirements and the leverage ratio were protections for the UK banking sector. However, capital is based on risk-weighted assets, which, as he has accepted, are controversial and, to many people’s minds, do not provide the level of protection that is required. It therefore becomes acutely important that the leverage ratio provides that protection. As has been said, given the size of the UK banking industry, it is critical to prioritise safety and soundness. Those things will be delivered by a higher leverage ratio.

[Greg Clark]

I do not disagree with the hon. Gentleman’s analysis. A higher leverage ratio is important. However, we have reflected the view of the Vickers commission that a higher leverage ratio is not necessarily required immediately. It is our intention to bring it in following the review in 2017. That is a reasonable time frame. I repeat that it is our intention that there should be a backstop ratio.

The final major difference between the Bill and what was recommended by the parliamentary commission is that it does not include proposals on how creditors, rather than taxpayers, will be expected to bear the costs in the event of a bank failure. We are working with other European countries to develop a credible and effective bail-in tool as part of the European recovery and resolution directive, reflecting the recommendations of the global Financial Stability Board.

The Irish presidency of the EU has set out plans to make rapid progress towards concluding the recovery and resolution directive. The RRD is due to come into force in 2015 and the bail-in tool by 2018. Given that progress, we have not included clauses on the matter in the Bill, but if agreement cannot be reached, which we do not expect to happen, we will consider tabling amendments later in the Bill’s passage to allow the UK to act alone.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does my right hon. Friend agree with me and Andy Haldane that bank account number portability could make a positive contribution to the prospects of easy resolution in the event of a future bank failure?

[Greg Clark]

My hon. Friend is a passionate advocate of that, and I think that what I will say about it will please her. I hope that she will be able to contribute to the debates on it in the weeks ahead.

The Government intend to go further on the matter of competition than was suggested in the reports of the two commissions. I strongly believe that the concentrated nature of the UK banking industry is unacceptable. I want to see far greater possibility, and indeed reality, of entry into the market by new banks and building societies. One of the barriers to that has been access to the UK payments system. Potential challengers have to win the permission of incumbents to be able to use the system. The Government will therefore shortly consult on a proposal to make access to the payments system regulated, to ensure that it is available on fair, reasonable and non-discriminatory terms. Subject to the findings of the consultation, the Government will consider tabling amendments to the Bill to give the regulator the necessary powers. I think that would address my hon. Friend’s ambitions.

[John Mann]

I welcome the Minister’s comments. Will he also table an amendment to recreate the Halifax building society out of the state-owned Lloyds-TSB bank? That would immediately create a major competitor on the high street that would be hugely popular, as it was before it was bought out.

[Greg Clark]

We want to see greater competition and more entrants. The hon. Gentleman will know that in the case of the banks in which we were in the unfortunate position of having to take a shareholding, the arrangements that govern that shareholding require us to operate at arm’s length of the interests of other shareholders. No doubt he will be able to make his points throughout the passage of the Bill.

[John Mann]

This is a Bill, and it can become an Act, so the Minister could table a Government amendment to do precisely what I said. Why is he not taking the opportunity to recreate the Halifax building society, which hundreds of thousands—perhaps millions—of consumers across the country would greatly welcome?

--- Later in debate ---

[Greg Clark]

All I would say is that that is not one of the Government’s proposals. We operate at arm’s length, but if the hon. Gentleman is a member of the Bill Committee he will be able to table such an amendment, and I am sure it will be vigorously debated.

I hope that in years to come the Bill will be viewed as a landmark piece of legislation in the history of our economy. I readily concede that a Bill entitled the Financial Services (Banking Reform) Bill does not set the heart racing, but important legislation can have a profound effect on our economy and come to represent a particular approach. That is shown by our familiarity even today with an American Act, the Glass-Steagall Act, the common name for the US Banking Act of 1933. I am modest and realistic enough to hold out no hope or expectation that this Bill will be referred to in 80 years’ time as the Clark-Javid Act, but if the House’s scrutiny is as thorough and constructive as I hope it will be, the names of Vickers and, dare I say, Tyrie might find a place in the history books. The hon. Member for Nottingham East and even myself might get a footnote.

The real test of the Bill is for it to establish once and for all the conditions in which the British banking system can be a global success story for decades to come while contributing to, not detracting from, the prosperity of the British people. I commend the Bill to the House.

--- Later in debate ---

[Chris Leslie]

Hindsight is a wonderful thing. All I say to the Father of the House is that we are now in a situation where we have a new Financial Conduct Authority, the Prudential Regulation Authority, the Financial Policy Committee and the Monetary Policy Committee. The Bank of England is of course still involved, and the Chancellor of the Exchequer will still have a number of powers. He may not have realised it, but the Government’s changes have not exactly simplified the regulatory environment. I digress. That was the Financial Services Act 2012, but we are addressing the Financial Services (Banking Reform) Bill in 2013.

[Greg Clark]

When I took over my role, I read the Hansard report of the November 1997 debate. I commend it to the hon. Gentleman because it makes it absolutely clear that we opposed the creation of the FSA in the form proposed because we predicted it would be a mess. The then shadow Chancellor, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), said:

“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 is exactly what happened.

[Chris Leslie]

Conservatives have a tendency to try and rewrite history, but this really takes the biscuit. If the Minister is seriously saying that he would have preferred to have stayed with a non-statutory regulatory arrangement, which was the option available, he should stand up and admit it. He often asks where the apologies are, but we have accepted that we should have adopted a more prudential approach to regulation than the arrangements in the Financial Services and Markets Act 2000. It is now equally important, however, that Conservative Members recognise that regulation is a good thing, that we need regulation of the financial services sector and that they were wrong to prefer a self-regulatory, non-statutory environment. Until they do that, they will never really confront the demons that still exist within the Conservative party’s philosophy.