Financial Services (Banking Reform) Bill

Mark Field Excerpts

Monday 8th July 2013 Commons Chamber

[Chris Leslie]

Well, pardon me for daring to suggest that the Government have got this totally upside down and the wrong way round. They set up the commission and asked its members to come forward with recommendations, as they dutifully did, for which I thank them, and then ignored them in the Commons Committee and Report stages. That means that it is all to be debated in the detail that is required when the Bill reaches the House of Lords.

[Mark Field (Cities of London and Westminster) (Con)]

Given that on Second Reading I suggested that much of the real deliberation would take place in the other place, it would be churlish of me to disagree entirely with the sentiments expressed by the hon. Gentleman. The situation was ever thus, given the parliamentary majorities. This has not been a chaotic process but, understandably, a holding response by the Treasury. It is a fast-moving situation. I suspect that a further banking reform Bill will be debated in the next two or three years.

[Chris Leslie]

It probably will, particularly if there is a change of Administration, but we will come to that in a couple of years’ time.

--- Later in debate ---

[Mark Field]

Two things come to mind. First, there should be a sense of due process, which I think is present in the Government amendment. Secondly, there is genuine concern about uncertainty and the notion of an electrified ring fence. As the hon. Gentleman will know, I have questioned the whole issue of ring-fencing and the potential uncertainty it provides in this business, particularly in the fast-changing world we have seen over recent years. This is therefore a sensible response from the Treasury to the whole concern, which goes well beyond special pleading from the banking fraternity.

[Chris Leslie]

Most of the debate we have had in the short time available has pressed for firm action to be taken towards a sector that—let us not forget—brought down the economy, created massive deficits in our public finances, and required rescue by the taxpayer because of a blurring of the lines between issues that affected ordinary households up and down the country and high-risk investment banking activities that needed strong safeguards. Simply saying that we will have ring- fencing with no means to enforce or police that—no “electrification”, as it has been termed—would make that concept totally redundant. That is why members of the Parliamentary Commission on Banking Standards were surprised that the Government always seemed to take the path of least resistance—“Let’s not upset the banks too much; let’s try and go back to business as usual”—and are not learning the lessons of history.

We have re-tabled amendment 18 not just to have a specific firm-by-firm back-stop power for separation in case ring-fencing fails, but to have sector-wide powers as a back-stop in reserve should ring-fencing not work. We have the capability for full separation, but the Government have stubbornly refused to put that on the statute book—“Oh well, if we have such circumstances we can always legislate further down the line”—as if passing a Bill on such matters can be done quickly or effectively in any way.

--- Later in debate ---

Standards will improve and the incentive to game the Vickers rules will diminish if, and only if, the ring fence is made more robust. If banks try to find holes in the ring fence, they should be at risk of full separation. We argued in our first report that that power should lie primarily in the hands of the regulator, and we called this additional power the electrification of the ring fence. The risk of the shock of separation would be an essential incentive to improve behaviour.

[Mark Field]

My hon. Friend talks about the idea of incentives to find holes in the ring fence. Surely it is in the nature of the way in which one looks at regulation to try to find holes in the ring fence. There is nothing untoward about the idea of looking at a regulation or law and trying to find a way around it. Obviously, one should try to do so without breaking the spirit of the rule or regulation, but if we live in a highly regulated society it is surely inevitable that those who are regulated will look to try to find ways of avoiding them. Surely that is a fault of having over-regulated societies, whether in banking or in other fields of commerce.

[Mr Tyrie]

I am not going to delay the House by disagreeing for too long. It is rare that I disagree with my hon. Friend, but I wonder whether we would like surgeons to test all the time the regulations that encourage them to do a good job as they pull out their scalpels and wonder if they can get away with just one incision here or there.

[Mark Field]

I think my hon. Friend makes my point for me. The medical profession is a profession and relies on such things as the Hippocratic oath, and it has a centuries-old approach to how they go about their day-to-day business. An over-regulated industry is one that encourages the avoidance of regulation. Genuine professionals look on their professional responsibilities in a very different light.

[Mr Tyrie]

There is a heap of regulation surrounding the wielding of those scalpels. The common feature of the two industries is not the professionalisation or non-professionalisation of the industry; it is that both owe a duty beyond bettering themselves. In the case of the banks, they owe a duty because of the implicit guarantee; in the surgeons’ case, they owe a duty to the patient. I will not prolong this discussion any further, but I think most people accept that we do not want banks constantly trying to find a way around or through the ring fence.