Financial Services and Markets Bill

Lord Archbishop of Canterbury Excerpts

2nd reading
Tuesday 10th January 2023 Lords Chamber

[The Archbishop of Canterbury]

My Lords, this year marks the 10th anniversary of the final report of the Parliamentary Commission on Banking Standards, Changing Banking for Good. I declare my interest having served on that commission, and I welcome the presence in this debate of the noble Baroness, Lady Kramer, who also served, as did the current Lord Speaker. I also welcome the maiden speeches of three noble Lords today: the noble Lords, Lord Ashcombe and Lord Remnant, and the noble Baroness, Lady Lawlor.

We need to remember that the extraordinary crisis in 2008—which led to the various commissions, reports and changes in regulations, including the financial services Act 2013, in which the Parliamentary Commission on Banking Standards played a part—caused huge and ongoing crises. While welcoming the Bill very strongly, I join some of the hesitations mentioned by the noble Lords, Lord Hunt, Lord Sharkey and Lord Vaux. It has been estimated that the financial services industry, and particularly the major banks, have an effective subsidy as a result of the implicit government guarantee that they receive, which is worth approximately £30 billion a year. If there is £30 billion a year going spare, many other industries and not a few churches would welcome that very warmly. However, that subsidy, which is at the risk of the taxpayer, as we saw in 2008 and 2009, is what gives the result of the banks having heavy social obligations; we must look carefully at that when the Bill reaches Committee, as has already been said. The issues of inclusion, stability and access at all levels, especially for micro-businesses, are very important, not least for levelling up.

I will raise three particular and short issues, the first of which is the human factor. The banking standards commission commented that, in the rapidly changing science of the financial markets, regulation is a vain hope, as the noble Lord, Lord Vaux, has already said. By the time regulation is brought in to address a problem, all but the doziest horses will have long since fled the stable. The commission highlighted that the question of culture is at the heart of good banking practice: attitudes of greed, the socialising of losses and the personalising of profits, the kind of legacy people wish to leave, and the issues of virtue. Is the mindset and approach of key leaders in the industry one of casino banking or banking for the common good? That is essentially a moral question.

Some of that is addressed very well in the Bill. I particularly welcome Clause 69, addressing credit unions, and the opportunity that that will give for levelling up and extending the range of financial access to small businesses. But we see in the recent crypto-market crash a perfect example of the failure of culture, as well of regulation, and of technology moving infinitely faster than any regulation. We need a system that is agile and keeps regulation light, so that the industry is competitive, but keeps principles tough and flexible, with heavy consequences for breaking them.

On the importance of capital adequacy and the ring- fence, this was clear at the time of 2008, when one of the major banks had 2% capital to support a more than £1 trillion balance sheet. We need to recognise that banks go under because of bad lending and bad dealing, and the remedy to that is adequate capital and adequate principles and culture—otherwise, we will get back to the point, as we did in 2008, where the taxpayer bears the burden.

Finally, we need competition and an effective industry but not a race to the bottom. There needs to be a race to the top, to the best-quality services, which serve people and the common good both now and in future generations through its green aspects. There has been a tendency over the years to say how much the City contributes, but let us be clear that, if we take into account the roughly £250 billion pumped into the banking system in 2008, it is not so obvious that the City is in credit to the taxpayer—it may well be that it is in significant debit. Nevertheless, this Bill is very positive. As long as it ends up reminding financial services that they are services for all and has principles at its heart, it will be welcomed and make a significant difference.