Banking Reform

Debate between Mark Garnier and Mark Hoban

Thursday 14th June 2012 Commons Chamber

[Mark Garnier (Wyre Forest) (Con)]

I am grateful to my hon. Friend for his statement today, and also for these measures, which go a long way in dealing with the “too big to fail” problem, and in some ways deal with the “too small to start” problem. He will be aware that in the last 100 years, only one ab initio banking licence has been granted. Part of the problem is a reluctance on the part of officials at the FSA to grant new banking licences. Will he look again at the issue of competition in the Prudential Regulatory Authority, in order to try to help challenger banks enter the marketplace?

[Mr Hoban]

My hon. Friend makes a good point. As I have said, the Bank and the FSA are looking at prudential and conduct requirements to ensure that they are proportionate. However, the other thing I would say is that the implicit guarantee enjoyed by our bigger banks distorts competition. Our reforms tackle that, helping to create a more level playing field for new entrants and enabling them to compete properly with established players.

Financial Services Bill

Debate between Mark Garnier and Mark Hoban

Monday 23rd April 2012 Commons Chamber

[Mark Garnier]

It is a great pleasure to follow the hon. Member for Leeds East (Mr Mudie), with whom I serve on the Treasury Committee. It is interesting that I am the fourth consecutive Committee member to speak.

The House will not be surprised to hear that I rise to speak to new clause 1, tabled in the name of my hon. Friend the Committee Chairman, under whom it has been a great pleasure to serve. He is a very forensic Chairman of a Committee doing some extraordinarily good work at a time when it could not be more important—when we are facing some of the most fundamental problems in the economic world and when it is incredibly important that we do something significant about financial regulation. There is no doubt that something needs to be done. We have had a problem with a system of financial regulation that failed to address the problems with the banks, and the Bill travels a huge distance in trying to resolve those problems and come up with a robust new regulatory framework.

Having been a compliance officer under not one but three regulatory regimes—the Securities and Futures Authority, the Financial Services Authority and the Securities and Investment Board—and, prior to that, a regulated dealer on the floor of the stock exchange under the old stock exchange rules, I have had a fair degree of practical experience of financial regulation. Furthermore, in the past 18 months or so, I have, with the rest of the Committee, spent a huge amount of time scrutinising and studying the draft recommendations for the Bill. I also spent some 50 hours, in the Bill Committee, with the hon. Member for Nottingham East (Chris Leslie), who waxed lyrical and at great length—and with great intelligence, I might add; and here we are on the Floor of the House talking about the matter yet again.

A number of things in the Bill are not ideal, but the one surgical cut that would have the most effect would be new clause 1. The Bill contains perhaps the single most fundamental change that we will see in financial regulation—the creation of the Financial Policy Committee. We have heard a lot about the FPC. One of the criticisms is that it could make profound changes to our financial system in trying to deal with financial instabilities, with bubbles that seem to be growing and all the rest of it. We can speculate ad nauseam about the type of interventions that could be made, but the one that people talk about a great deal is where the FPC may, with one of its tools of direction or recommendation, direct banks to change the loan-to-value ratios on mortgages. That could have far-reaching effects for our constituents.

[Mr Hoban]

May I make it clear that the FPC has ruled out intervening on loan-to-value ratios? It is important that we do not let this hare continue to run much longer.

[Mark Garnier]

I am grateful to my hon. Friend for that clarification. Interestingly enough, though, it is perhaps one of the powers that the FPC should have kept. Although it could have profound effects for people moving and so on, it is incredibly important not to lose sight of what others issues the FPC is there to address. In the past, as bubbles have grown, Members have sometimes been reluctant to take away the punch bowl before the party is over. Sometimes, when we allow bubbles to get bigger than they should be, the result is a financial crisis of the kind that we have seen. There are many things, on an analysis of the financial crisis, that could have happened, but one of them was allowing a colossal asset bubble to grow against uncontrolled lending. If a Member of Parliament or the Chancellor of the Exchequer had turned around in 2007 and said, “We’re going to stop that,” there would have been an absolute outcry. However, if the FPC had done that, it would have been acting without the worry about what would happen at the next general election, and perhaps we would have avoided the problem. It is for that sort of intervention that the FPC is being created.

Regulatory and Banking Reform

Debate between Mark Garnier and Mark Hoban

Thursday 16th June 2011 Commons Chamber

[Mr Hoban]

I hear the right hon. Gentleman’s request, and his right hon. Friend the Member for Edinburgh South West (Mr Darling) has made a similar request, to which he did not seem to accede when he was Chancellor of the Exchequer. The new regulatory regime does learn the lessons of the past, and the supervisory style and confused mandate of the FSA mean that we need to change.

The lesson that we have learned from the financial crisis is that, importantly, the Bank of England’s expertise in market surveillance and in understanding macro-prudential trends can best work with the needs of a micro-prudential supervisor by ensuring that that micro-prudential supervisor is an independent subsidiary of the Bank. And, just so the right hon. Member for Leicester East (Keith Vaz) does not get the wrong impression, I did not work on the audit of BCCI.

[Mark Garnier (Wyre Forest) (Con)]

My hon. Friend will know that the financial services industry in this country employs some 1 million people and generates £50 billion a year in tax revenues. Will he assure me that these proposals strike the right balance between protecting the consumer, whom the Financial Services Authority failed so much, and maintaining our leading position in the global financial marketplace?

[Mr Hoban]

My hon. Friend is absolutely right to highlight the numbers of people employed in financial services not just here in London, or in Edinburgh and Glasgow, which are well-known financial services centres, but throughout the country. We need to ensure that the industry continues to be a strong contributor to employment, to economic growth and to tax revenues, and to ensure a balance so that it does not pose an excessive risk to the strength of the UK economy. The measures that we have put forward today strike the right balance between encouraging the industry to continue to be a wealth and employment creator and ensuring that the right protections are in place for consumers, so that they buy the products that those companies sell. Those companies will not thrive unless there is consumer appetite for buying pensions, for investing in their futures, for taking out deposit accounts and for buying life insurance policies. We need to get that balance right between consumer interest and business interest, but businesses will be best served if consumers feel happy about buying products from them.