Independent Banking Commission Report

Lord Tyrie Excerpts

Monday 12th September 2011 Commons Chamber

[Mr Osborne]

I respect the right hon. Gentleman’s experience of having been through all that he went through as Chancellor. He had to deal with these problems in real time over long weekends, and I have paid tribute previously to the work that he did on behalf of our country in those difficult months. As for his book, I have only just started reading it, but as far as I can see, I get off relatively lightly compared to the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown).

The right hon. Gentleman made a good point about the interconnectedness of the banking system. The Basel rules are significant, and I believe that that process was initiated when he was Chancellor and representing the United Kingdom. New arrangements have been agreed in record time. It took 10 years to come up with Basel II, but about 18 months to come up with Basel III. The international rules are important because they help us to deal with investment banks in foreign jurisdictions, such as Lehman Brothers, and to protect all globally systemically important banks and give them bigger cushions. As he well knows, new proposals are coming down the track for additional capital requirements on the most globally systemically important banks. That is significant. Also, we are putting in place the recovery-and-resolution ideas that, again, he initiated when he was Chancellor in order to ensure that we can deal with the failure of the UK end of an American investment bank. That will ensure that these banks do not just live internationally and die nationally, but that we can resolve any problems.

I would make a broader point, however. Yes, we have to do that at an international level, but we also have to consider regimes that have large concentrations of banking, such as Switzerland—let us, for a moment, leave aside Ireland and Iceland, which were obviously virtually bankrupted by what happened. It is interesting that Switzerland, which, as the right hon. Gentleman knows, is as keen as anyone to remain internationally competitive, has introduced its own domestic regime for its banks. It is wholly appropriate for us to consider doing that in this country while, of course, recommending to other countries changes that we think are sensible for all jurisdictions.

[Mr Andrew Tyrie (Chichester) (Con)]

Sir John Vickers has made a strong case both on competition, on which he has endorsed proposals from the Treasury Committee, and on the ring fence, on which the Committee will now be taking evidence from him. On the timing of implementation, however, rather than adding a ring fence to the list of measures in the current Financial Services Bill, which is already long and complex, surely it is sensible to commit now to a separate ring-fencing Bill in this Parliament, while making it clear now that full implementation of the higher capital and debt requirements, which might lead in the short term to lending risks, can be left at least until 2018 or possibly later?

[Mr Osborne]

The Chairman of the Treasury Select Committee makes a sensible suggestion. It is likely—I do not want to say certain—that we will need a separate piece of legislation on some of these specific changes to banking. However, I hope that we can also use the Financial Services Bill to implement other key parts of the reform. That is the case because we want to get this right. The draft Bill is currently being discussed by the Joint Committee chaired by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), and we simply will not be able to produce all that detail in the next couple of months before the Bill is introduced. We have to get this right. As John Vickers said, short-termism got us into this mess, and we need a bit of long-termism to get it right. However, I hope that the commitment to legislate in this Parliament reassures people that it is going to happen in this Parliament. This bunch of Ministers, this Government, will be held accountable if we do not legislate in this Parliament. We have given a clear commitment, and I am sure that the work of the Treasury Committee, which my hon. Friend chairs, in looking at how this report can be put into practice will be very valuable.