Financial Services (Banking Reform) Bill

Debate between Mark Garnier and Steve Barclay

Monday 11th March 2013 Commons Chamber

[Stephen Barclay]

Yes, I can address that question head on. It is logical to have introduced measures to try to manage risk in the financial sector, but we are requiring banks to retain more and more assets at the same time as asking them to lend more. We are therefore asking them to do two conflicting things, as well as introducing a structural fix that innovative people will often be able to find ways around. For example, the shadow banking sector is not affected by this kind of proposal. If we want to address innovation, to be flexible and to move with the market, and retrospectively to impose fines for wrongdoing, we would be far more successful if we changed the culture than if we imposed rigid rules.

In many ways, I agree with the hon. Gentleman, in that we all have constituents who complain that the banks are not lending, but perhaps that is an issue for another day. There are many areas in which the banks’ behaviour is wrong, but we cannot change the culture through rules alone. We had more than 6,000 pages of rules, but that did not achieve the right culture. We can achieve it by having individual accountability, and one of the best ways of doing that is through personal fines.

I am sure that the hon. Gentleman read the Daily Mirror today, as I did; I always try to avail myself of the Daily Mirror. On the front page, there was a story about the “Fat cat in the hat”, who is a former Barclays executive, according to the report, and it must be true because it was in the Daily Mirror. The point is that it is individuals like that, where there is alleged wrongdoing, who are able to keep their bonuses and keep their profits. That does not send the right message on culture. Rules are too blunt a tool.

If we want to change the banks, the Bill is extremely welcome, but I hope that the very constructive proposals put forward by my hon. Friend the Member for Chichester will be given further consideration. There is much to support in the Bill, however.

[Mark Garnier]

Does my hon. Friend agree that the Chancellor’s measures stating that the fines levied on RBS should be taken from the bonus pool go some way towards addressing the point that he makes?

[Stephen Barclay]

Those measures are a step in the right direction, but they will also catch the legitimate people, rather than focusing on those who have done wrong. There will be no means of clawing back from wrongdoers. Let us take the example of Sir James Crosby. To what extent would he face retrospective clawback? He is long gone, and he has taken the money.