Professional Standards in the Banking Industry

Lord Mann Excerpts

Thursday 5th July 2012 Commons Chamber

[John Mann (Bassetlaw) (Lab)]

In quoting the proceedings of the Treasury Committee, the Chancellor failed to quote accurately. I happen to have the transcript of yesterday’s sitting here, and it is unambiguous. The Tory vice-Chairman, the hon. Member for Sevenoaks (Michael Fallon), asked Mr Diamond the final question on this point. He said:

“I understand all that, but the effect of what you have written down here is that Ministers or officials were in effect asking you to fiddle your submission.”

Mr Diamond replied, in his final comment on this point:

“I didn’t believe that, no.”

He also said something that is of even more significance than the Chancellor’s smears, when it comes to the decision that has to be made. Diamond confirmed what we knew already from what the Financial Services Authority had said: he said that other banks were involved. One bank that has had to sack people is the largely state-owned Royal Bank of Scotland—the one that the Chancellor is primarily responsible for via a Government agency. There is no question but that what went on in Barclays was going on in—it has been suggested—at least 20 other investment banks, including the one that the Chancellor is predominantly responsible for: the Royal Bank of Scotland.

This scandal is therefore not restricted to Barclays. We know what a scandal Barclays is. I asked Mr Diamond 13 questions yesterday, and got no answers, other than his confirming that, as the man in charge of an investment bank, he asked no questions and carried out no analysis whatever of why the rates were different or whether there were any oddities in the rates that were being presented to the British Bankers Association by his bankers. He says he knew nothing, which is a little incongruous, but he did confirm that there were inter-bank issues here, as bankers from other banks were ringing Barclays and asking for favours—with the now infamous bottle of Bollinger being offered as a present in recompense.

The Royal Bank of Scotland is the Chancellor’s responsibility. Unfortunately, he failed to take interventions, including from myself; if he had allowed me to intervene I would have asked him directly what questions he has been asking about what has been happening over the last few months with the fiddling of the LIBOR rate within RBS—the bank for which, I repeat, he is predominantly responsible. In particular, I would have asked what the FSA is now telling the Chancellor about its inquiries. That is important because it will impact hugely on the nature of the investigation to be carried out. To suggest, as did the Chancellor—and the Prime Minister previously alluded to it—that this investigation could be confined solely to Barclays bank is clearly nonsense. What we are going to see, which we have not yet seen, is what the FSA has to say about these other banks—up to 20 of them. We are also going to see what comes out in the United States over the next six months—precisely while the inquiry, whether judicial or parliamentary, is ongoing.

The only thing of which we can be certain is that this is a moving feast. That creates a major dilemma for us, whichever way we choose to go. A judicial inquiry cannot be limited to a short period of a few months and guaranteed. If it comes out that what happened at RBS is comparable to Barclays, that presents an even bigger issue for us and for the Government to address. RBS is a huge British bank—one that the taxpayer has had to bail out and one largely owned by the taxpayer. The consequences for the Exchequer and the taxpayer will undoubtedly be even larger for RBS than for Barclays.

We do not know where the civil actions in the US are going to go or how quickly they will be carried out. That problem would afflict a judicial inquiry, however independent it was—and it would be independent—but it would afflict a parliamentary inquiry even more so. Who is going to sit on it, and for how long? That might sound like a small question to the outside world, but it is a major question. If the Chairman of the Treasury Committee or its members participate in the parliamentary inquiry, which would make some sense, it would effectively put the Treasury Committee out of action—perhaps for six months, but potentially for a year or 18 months—at a time when all these other major issues are before it.

That is the biggest reason why the joint inquiry will not work. It is simply not feasible for the Chair of the Treasury Committee to be effectively seconded for that period of time. However well resourced the Treasury Committee, its members will have to do two jobs simultaneously. The RBS question has not been answered in this context. I urge the House to consider it, because the issues are even bigger than for Barclays.