Local Growth Deals

Debate between Greg Clark and Andrew Love

Monday 7th July 2014 Commons Chamber

[Greg Clark]

My hon. Friend is absolutely right and I am grateful for her kind words. That is one of the reasons we have established a pipeline so that, if there is a delay in any particular project, another will be ready to take its place and be implemented. Dorset has a huge contribution to make. I have mentioned some of the schemes. One of the very interesting and exciting ones for the visitor economy in Dorset will be a new visitor attraction called Jurassica, which will feature the great strengths of the Jurassic coast. It has been suggested that some exhibits might come from the Opposition Benches, but I am sure the fossils will be from Dorset.

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

Does the Minister agree that this modest but welcome proposal is certainly not a giant step towards rebalancing the British economy? Will he also confirm, as I think he was angling towards doing in an earlier response, that there is in fact no new money involved in today’s proposal? I think that the focus on affordable housing in London is correct, but could not the Government have done more about the borrowing powers of local authorities, to really get affordable housing going in London, where it is much needed?

[Greg Clark]

If the hon. Gentleman reads the small print, he will see that that is part of the announcement. I do not agree with his assessment. He should talk to the leader of Leeds council, who has said:

“This deal spells the beginning of a fundamental shift in the relationship between Whitehall and the regions. It marks the first steps of a new era which will allow the north”—

he is from Leeds—

“to truly control its own destiny.”

Such endorsements show that this is a pretty significant set of changes.

Oral Answers to Questions

Debate between Greg Clark and Andrew Love

Tuesday 10th September 2013 Commons Chamber

[Greg Clark]

Yes it will. The scheme is available to purchasers who already own their own home but want to move to a bigger one, perhaps because, like my hon. Friend’s constituents, they have had children. They are currently trapped in the home they have bought, and that is why the scheme we are introducing is important. It will allow people who can afford to pay the mortgage to achieve their dream of home ownership.

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

The mortgage guarantee scheme does nothing to help housing supply. In those circumstances, many organisations suggest that the scheme will be inflationary. What is the Minister doing to reassure those who are concerned that the scheme will increase house price inflation?

[Greg Clark]

The hon. Gentleman is wrong to say that the scheme has done nothing to encourage supply; 10,000 homes have been started under the current scheme. The Home Builders Federation itself has said that a lack of affordable mortgage availability remains the biggest constraint on housing supply. That is a problem; we are solving it.

Financial Services (Banking Reform) Bill

Debate between Greg Clark and Andrew Love

Tuesday 9th July 2013 Commons Chamber

[Mr Love]

Given that the new payments regulator will take some time to set up, I hope that the Minister will keep a watching brief on seven-day portability, because there is still some controversy over the proportion of fees for the receiving bank as opposed to the bank losing the customer. This was brought to the commission’s attention; we commented on it, and I hope that he will keep it under review.

[Greg Clark]

I certainly will keep a close eye on that, as too, I am absolutely certain, will my hon. Friend the Member for South Northamptonshire. The arrangement is that the fees should be shared between the bank of departure and the bank of arrival, which I dare say reflects the different costs. However, we need to keep an eye on its effect on competition.

In response to the parliamentary commission’s report, the Office of Fair Trading has announced that it will bring forward its investigation into small and medium-sized enterprise banking as part of an ongoing programme of work to investigate concerns about competition in banking. The hon. Member for Nottingham East rightly wants this to go further. The OFT is engaged in a programme of work looking at all sections of the banking sector. As I think Members know, it has recently completed an investigation into the personal current account market, and on that narrow point has argued that there should not be an immediate referral pending some of the changes taking place or in the pipeline.

We have asked that that work considers the impact on the new challenger banks created by the divestments from Lloyds and RBS. The hon. Gentleman asked where they stand. My understanding is that in both cases the parent banks are looking to move forward with initial public offerings of the challenger banks and that they intend them to form part of the competitive environment. The OFT aims to conclude its programme of work next year. It will then decide whether a market referral to the Competition Commission is needed. I can tell my hon. Friend the Member for Caithness, Sutherland and Easter Ross that such a referral would not require legislation; the OFT could make one under its existing powers.

Given that commitment, which is more or less of the same time frame as that envisaged in new clause 8, and given the significant measures being implemented to enhance competition, I hope that hon. Members will agree that the new clause, which calls for such a referral in 2014, following Royal Assent, should not be adopted. It is important that the OFT completes its review in 2014, so that it can build up a file of evidence to be submitted to the Competition Commission. That would be consistent with what both the independent commission and the parliamentary commission called for: that the OFT be in a position to make a referral in 2015. The OFT’s work is absolutely in line with that.

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[Greg Clark]

That is happening. The review that the OFT is carrying out is comprehensive—it will keep us informed in that process—and is about building up the evidence to make that judgment in accordance with exactly the time frame that my hon. Friend has set out.

New clause 15, standing in the name of the hon. Member for Brighton, Pavilion (Caroline Lucas), would require the Government to consult formally on the creation of a network of regional banks. I strongly agree that a revival of regional banking in this country is a very good thing. Yesterday in the Chamber my hon. Friend the Member for Hexham (Guy Opperman) reported on a meeting that he organised in Gateshead. I am pleased to tell the hon. Lady that a senior director of the Sparkassen, Dr Thomas Keidel, was at that meeting. He very much commended the Sparkassen model in Germany as something that could be emulated in this country. In fact, when one of the delegates objected that it was very much part of the German system and culture, which might be difficult to transplant to this country, Dr Keidel immediately pointed out that the German system was explicitly modelled on the UK system before it was abandoned in this country. I am therefore optimistic that what is proposed should be possible.

There was certainly great enthusiasm on Tyneside—indeed, momentum was being established—for launching a regional bank for the north-east. The hon. Lady might also be aware that the Cambridge and Counties bank—a joint venture between Cambridge county council and Trinity Hall, the Cambridge college—is already active and is providing lending to local small and medium-sized enterprises. The steps that the Prudential Regulation Authority has taken to license new entrants—

[Mr Love]

I apologise to the right hon. Gentleman for jumping in rather late, but before he leaves the issue of regional banks I want to mention one of the most promising areas, which is community development institutions. They are working at the regional and local level; however, their sources of funding could be enhanced immeasurably if community interest tax relief was set at a proper rate. I recognise that the Treasury has carried out a consultation. I am not asking the Minister to respond now, but perhaps he will at some stage inform Members of where the Treasury has got with that consultation and whether it will review the incidence of community interest tax relief.

[Greg Clark]

I do not know whether the hon. Gentleman will be reassured or alarmed to learn that I had not left the subject of regional banking just yet. Indeed, I want to come to the precise subject he has just raised.

The Prudential Regulation Authority’s changed procedures were referred to—by, I think, my hon. Friend the Member for Wyre Forest. It is now possible to license new entrants, who could require up to 80% less capital up front than previously. That means that the time is now ripe for new banks in the regions to be established. The hon. Member for Brighton, Pavilion, in her new clause 15, and the hon. Member for Edmonton (Mr Love) refer to CDFIs—community development finance institutions. Some £60 million of wholesale funding for CDFIs is available through the regional growth fund. Tax relief up to 25% is already available on investments made by individuals and companies into CDFIs. Of course I will talk to my hon. Friend the Exchequer Secretary and carry forward the hon. Gentleman’s representation for further changes, but a significant set of advantages is available. Similarly, the more flexible rules for credit unions that have been introduced and the £38 million of funding for this movement have also created greater opportunities.

Financial Services (Banking Reform) Bill

Debate between Greg Clark and Andrew Love

Monday 8th July 2013 Commons Chamber

[Greg Clark]

This group deals with some of the recommendations of the first report of the Parliamentary Commission on Banking Standards, which was published on 21 December last year. The Government agreed to bring forward amendments on Report to implement those recommendations, and those amendments are amendments 1 to 4, 6 to 10 and 11 to 16. I will turn to them in a few moments, but the amendment proposed by my hon. Friend the Member for Chichester (Mr Tyrie) relates to his parliamentary commission’s final report on standards and culture, which was published on 19 June, and it therefore provides a perfect opportunity—as I suspect my hon. Friend intended—to say something about that further report and how the Government intend to implement its recommendations.

The Government warmly endorse the report. It is a landmark piece of work and I commend its unflinching, clear-sighted assessment of the damage done to the reputation of banking in this country and all around the world.

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

The parliamentary commission requested the Government to consider giving their response—and tabling amendments —well in advance of this Report stage, yet that has been given only this afternoon. Why are we faced with having to absorb this document at very short notice?

[Greg Clark]

I pay tribute to the hon. Gentleman for the long hours he has devoted to the work of that commission. The Government did indeed make a commitment on Second Reading and before then to make use of the Bill before us to take forward the recommendations of the commission. It was always intended that that should be at the House of Lords stages of the Bill, but I will have more to say about that in a few moments. We will absolutely give the required time to consider those amendments and to make use of a Bill that is before the House, enabling us to respond rather than wait for a further piece of legislation.

The commission’s central judgment is absolutely right:

“High standards in banking should not be a substitute for global success. On the contrary, they can be a stimulus to it.”

When I visited Germany late last year, I picked up a copy of Handelsblatt and was struck by a double-page spread with a picture of the City of London and the headline, in English, “City of shame”. That shows the impact of the events of the financial crisis and subsequently on the reputation of this country’s banking system. Exactly as the commission says, if we are to restore the system’s global success, as we must, it is imperative that we improve its standards.

Therefore, in response to the commission’s report, I can confirm today that the Government will strengthen individual accountability by introducing a tough new regime that is recommended to cover the behaviour of senior bank staff; introducing new rules to promote higher standards for all bank staff; introducing a criminal offence for reckless misconduct by senior bankers—those found guilty could face a jail sentence; working with the regulators to implement the commission’s proposals on pay, specifically to allow bonuses to be deferred for up to 10 years and enable 100% clawback of bonuses where banks receive state aid; and reversing the burden of proof so that senior staff are held accountable for regulatory breaches within their areas of responsibility. We will also ask the regulators to implement the commission’s key recommendations on corporate governance. That will ensure that firms have to have the correct systems in place to identify risks and maintain standards on ethics and culture.

We will support competition in the banking sector by providing the Prudential Regulation Authority with what the commission asked for, which was a secondary competition objective to strengthen its role in ensuring that we have banking markets that benefit from the vigorous competition that delivers good outcomes for consumers. That will be in addition to the Financial Conduct Authority’s existing competition objective. In addition to introducing seven-day account switching later this year, the Government will ask the new payments regulator, once established, urgently to examine account portability and whether the big banks should give up ownership of the payment systems. The Government have also implemented the commission’s recommendation to conduct a review to look into the case for splitting RBS into a good bank and a bad bank containing its risky assets.

When the commission’s final report was published on 19 June, I undertook to provide an accelerated Government response by way of a Command Paper before the summer recess.

[Mr Love]

The press release that was—

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[Greg Clark]

I thought that I had explained the context at the beginning, which was that the amendment tabled by my hon. Friend the Member for Chichester deals specifically with the recommendations of the final report on the culture. As I said, I suspected that he had tabled the amendment in order to afford us the opportunity to debate these matters. I will move on to deal with the other amendments in the group if the House would prefer it.

[Mr Love]

May I seek some guidance from the Chair? I was about to ask a question pertinent to the discussion—

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[Greg Clark]

It is certainly true that the hon. Member for Nottingham East is seated, and it is also true that he was chuntering. My hon. Friend the Member for Hexham (Guy Opperman) has done the House a service in reminding it of the voting record of the hon. Member for Nottingham East, seated or otherwise.

The amendments clarify that the PRA must seek to minimise damage to the continuity of core services caused by the failure of a ring-fenced bank or any other member of its corporate group; an investment bank could, for example, suffer losses that threatened the whole group with bankruptcy. Amendment 1 requires the PRA to minimise the harm to the continuous provision of core services caused by the failure of other group members, as well as of the ring-fenced bank itself.

Amendment 2 clarifies that the failure of a group company includes its insolvency. Amendments 3 and 4 reflect those same changes in the remit of the FCA, in the unlikely event that the FCA ever became the prudential regulator of any ring-fenced bank. I hope that the House will welcome those amendments, which the Committee that scrutinised the Bill and the Parliamentary Commission on Banking Standards suggested.

[Mr Love]

I thank the right hon. Gentleman for being so generous in giving way. I want to take him back to the discussion about regional banking, because one of the parliamentary commission’s recommendations was that the Government should consider measures to break up RBS into regional banking. I seek his reassurance that the Government have not forgotten that recommendation.

[Greg Clark]

It delights me to hear the hon. Gentleman refer to today’s publication; it confirms what I thought and hoped, which was that the publication would inform the debate. I think that tomorrow we will come on to clauses that deal with precisely those matters.

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[Mr Love]

The parliamentary commission consulted widely and there was considerable concern about the weaknesses and the ring-fencing that had been suggested by Vickers. That resulted in a proposal for electrification. Is the right hon. Gentleman secure in the view that we have electrified the fence enough on the basis of the amendments he is proposing today?

[Greg Clark]

I will be even more secure when I have persuaded the hon. Gentleman, as I hope to do. He, being a fair man, will reflect on the fact that his distinguished commission undertook pre-legislative scrutiny of the proposals made by Sir John Vickers and his commissioners. Sir John did not recommend that there should be the power to separate. In fact, he has been persuaded by the institution-specific power of separation that his commission proposed, but has reflected in evidence to his commission that to go further and introduce a system-wide power is a separate matter and should come before Parliament in an explicit way rather than, as would be the case here, through a statutory instrument following an independent review.

The proposals before us, most fair-minded colleagues would concede, fall very far short of the degree of scrutiny and rigorous assessment, including by the hon. Gentleman’s commission, that the current proposals have gone through. Parliament would not have the ability to present amendments to proposals and at that stage to take account of the recommendations even of the independent review. So the procedures proposed are less than adequate to the scale of the policy change that would be embodied in them. If we are to be serious about the need to respect the views and the role of Parliament—as I have made clear, these are important matters—we must accept that the only right and proper and democratic way of legislating for full separation is by coming back to Parliament with full primary legislation, including the rigorous process that we have undertaken.

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[Greg Clark]

My hon. Friend has some experience of these matters. I think that the debates about structure are important and that structural reform will make an essential contribution to making the system safe for the purposes of taxpayers. However, having looked into it, I think that to have hanging over the system the sword of Damocles—the origins of the metaphor were the subject of an erudite debate in the Commission—would introduce an uncertainty into proceedings that might distract from the important work of implementing the existing provisions.

[Mr Love]

The reality is that we are seeking to balance conflicting issues. One respects the Government’s view that Parliament should be supreme in this regard, but the alternative argument, of course, is the one that the Minister has just put to us, about the sword of Damocles keeping the feet of the banking industry to the fire. We know that the industry has not been entirely with us in relation to setting up the ring-fencing arrangements and that it needs some encouragement to make it work effectively.

[Greg Clark]

The hon. Gentleman gets to the nub of the matter, because of course any attempt to evade the ring fence or to nibble the electric fence, as dangerous to health as that would be, could be undertaken only on the part of a particular institution, not the system. That is why we agreed with the commission’s report—it was not part of the Vickers report—that it was necessary, for exactly the reasons the hon. Gentleman mentions, to have a sanction against that type of behaviour, and that is what we have done.

A further power to separate the whole system could not be triggered by an individual and could not punish the actions of an individual institution. That is why I think that is a very different policy. It commands the support of some very distinguished and influential people. The Glass–Steagall approach, which of course the policy is modelled on, has its place in history, but I think that history also reveals that the Glass–Steagall arrangements were not immune to the very dangers my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay) pointed to. It is a good job my hon. Friend the Member for Chichester secured his amendment to the programme motion, because we are having a very interesting debate, but I would like to conclude, because there are other amendments that hon. Members would like to speak to. On that point, however, I urge the House not to allow at this stage the introduction of a very different policy into the Bill.

Let me turn to the amendments tabled by my hon. Friend the Member for Chichester, who I dare say will speak for himself in a few moments. I know that some of them were tabled to afford us the opportunity to discuss his commission’s report, and I think that this is now established as a very relevant opportunity. I will of course listen carefully to what he says. I am confident that the amendment the Government have tabled in response to the commission’s report can be improved during the Bill’s passage to take into account whatever concerns are embodied in his amendments.

Amendment (a) to Government amendment 6 would add a new condition under which the separation powers could be used: namely, when the regulator

“judges that there are serious failings in the culture and standards of the ring-fenced body or another member of its group.”

Of course, under the Government’s amendment the regulator would have the ability to separate the group if its conduct threatened to undermine the regulator’s ability to meet its continuity objective, but I think that, as the commission’s extensive deliberations showed, cultural failings might be present in banks that can result, for example, in significant harm to individual consumers or groups of consumers but nevertheless do not have systemic consequences. I think that the relevance of the proposed new power to take into account the culture is adequately covered under the provisions already in the Bill.

Amendments (b) to (p) concern the procedures for exercising the separation power. They would remove from the process: the second and third preliminary notice stages that extend to six weeks the time for banks to make representations; the requirement that the group be given a minimum of five years to effect separation; and the requirement for Treasury consent before a group can be required to separate. It is, of course, essential that a clear process be established for the exercise of the separation power. As I have said, I will listen carefully to what my hon. Friend says about reducing the number of warnings, which I think is the essence of what he is recommending, and about departing from the standard practice in financial services of allowing 14 days, rather than the six weeks that he proposes, for representations.

Cyprus

Debate between Greg Clark and Andrew Love

Monday 18th March 2013 Commons Chamber

[Greg Clark]

It is open to British pensioners to have their pension paid into another account. They can nominate that account from now on through the Department for Work and Pensions’ website. Their pensions are safe; we will make sure of that. The Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), will update the House. Once the details of the final package become known, in so far as they have implications for the payment of pensions, we will update the House.

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

My Cypriot constituents are shocked and angered that the much-publicised deposit guarantee scheme appears to be worthless. They are further outraged that the reason given for that is that the banks have not gone bankrupt, therefore the deposit guarantee does not apply. What action will the Minister take to speak to his EU colleagues to see what can be done, even at this late stage, to repair the damage to trust and confidence in our banking system?

[Greg Clark]

The hon. Gentleman and I had a conversation this morning. I know that he has many constituents who are very worried at this time, and I have said that I am happy to meet them so that we can understand their particular situation. It is clearly an unsatisfactory situation in which the Government of Cyprus, as I understand it, faced a choice between a measure such as this and contemplating the collapse of the banking system. That is a choice that no one would want to make. It is a choice that they made and that they are putting to the Cypriot Parliament, but just as this Parliament is sovereign, so that is true in Cyprus, and the debates that they will be having during the next two days will determine whether what has been proposed over the weekend is what pertains.

Financial Services (Banking Reform) Bill

Debate between Greg Clark and Andrew Love

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.

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[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.

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[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.

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[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.

Financial Services

Debate between Greg Clark and Andrew Love

Wednesday 6th February 2013 Commons Chamber

[Greg Clark]

My hon. Friend is right. The constituents of my right hon. Friend the Member for Tonbridge and Malling (Sir John Stanley) might be concerned if I sought to represent them, but my constituents in Tunbridge Wells do, I think, share the fury that has been described. For a bank that has caused the taxpayer to bail it out to such an extent to then engage in practices that could—had we not taken action to require clawback—have resulted in further cost to the taxpayer, is outrageous. I agree with my hon. Friend the Member for Bristol West (Stephen Williams) that the individuals implicated in such practices should leave the financial services and find a better living, rather than working in an industry in which trust and confidence is required.

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

I hear what the Minister says about the highest standards of regulation for the City of London, but how does he explain the fact that once again, American regulators have imposed fines that are three times higher than those from the FSA, thereby appearing much more robust in their investigation of LIBOR and other issues? Now that we are having a “twin peaks” model, what discussions is the Minister having with the regulator to ensure that it imposes appropriate fines and undertakes proper investigations to ensure that we root out the difficulties of the past?

[Greg Clark]

The hon. Gentleman makes a good point. He will know that there is a long-established culture of very high fines in the US. Fines in this country have increased markedly in recent years, although none of the institutions subject to FSA fines in recent months would regard them as anything other than exacting. It is right for us to follow the practice of other jurisdictions, including the US, in having a more explicit criminal code. Our amendments to the Financial Services Act 2012 mean that criminal sanctions explicitly for the manipulation of benchmarks are available that were not there in the past. It is right to take what the hon. Gentleman says seriously and strengthen our enforcement powers, and we are doing that through the legislation that has been passed.

Banking Reform

Debate between Greg Clark and Andrew Love

Monday 4th February 2013 Commons Chamber

[Greg Clark]

My right hon. Friend is right when he talks about our most important industry—certainly in terms of exports and what it contributes to the taxes that pay for public services. It is significant that more euros are traded in this country than across the entire eurozone. For that reason, we need to continue to have access to the single market and to argue—as I and the Chancellor do in ECOFIN after ECOFIN—to ensure that we secure our interests there. That is a constant fight, but I know that I and my right hon. Friend the Chancellor will always take that view when we are in Brussels.

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

I am a member of the commission, and we will of course examine the detail included in the Bill. The right hon. Gentleman’s reasons for not including a reserve power require further explanation. The Chancellor said that our commission ought not to unpick the consensus. We have taken evidence from a wide range of people—academics, bankers and others—who have all supported our recommendations on electrifying the ring fence. Will the Minister again give serious consideration to the recommendations that we have made?

[Greg Clark]

I do take seriously those recommendations, but this is not a difference between just the Government and the commission. The shadow Chancellor himself said only a little while ago that

“there is no need to break up institutions but there has got to be clear separation.”

I think people across all parts of the House have come to the same view on this, but I am respectful of the conclusions that the hon. Gentleman has reached.

Oral Answers to Questions

Debate between Greg Clark and Andrew Love

Tuesday 6th November 2012 Commons Chamber

[Greg Clark]

I certainly will. I think that there has been a concentration in the number of banks as a result of the financial crisis, and that is not a situation I want to see endure. If the suggestions in the report will help to reverse that, I am all ears.

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

Comparisons between banking fines for similar offences in this country and in the United States show that we are well behind the curve in that regard. Has the Minister had an opportunity to speak to the Financial Services Authority about a more robust form of regulation that will ensure that fines are appropriate to the issue at stake?

[Greg Clark]

The hon. Gentleman, who is a distinguished member of the Treasury Committee, makes an important point. It is crucial that the change we need in the culture of banking is achieved through leadership and through a clear warning that abuse, mis-selling and all the other vices that banks can fall into will be punished rigorously. The FSA knows my views on that and I will reinforce them to the authority.