Banking Reform

Matt Hancock Excerpts

Thursday 14th June 2012 Commons Chamber

[Mr Hoban]

Strong banks that are in a position to lend to businesses are absolutely vital to the long-term future of our economy. We have seen that the mistakes of the past eventually catch up with people. They have led to a weakening of bank balance sheets, which are now being strengthened. We need not only strong banks, but schemes in place to sustain bank lending and to ensure a supply of credit to SMEs.

[Matthew Hancock (West Suffolk) (Con)]

In the week we discovered that a plan put forward to the last Government to prevent the run on Northern Rock was ignored, I warmly welcome these proposals. How will the Minister ensure that as finance changes in the years ahead, the Vickers proposals to ensure separation will always stay up to date with new technology and new techniques?

[Mr Hoban]

My hon. Friend makes two important points. He is right to highlight Hector Sants’s comments this week about how the previous Government ignored his proposals, leading to a run on Northern Rock that triggered widespread financial instability. If his proposals had been listened to, we could have had more financial stability, which would have been to the benefit of the economy.

My hon. Friend is also right that finance changes. Part of the problem of the previous Government’s regime was that it did not keep pace with changes in the markets. The previous Government clearly did not understand what was going on in the banking sector, despite the many meetings between the City Minister and the banks, but I think the regime that we are putting in place is forward looking. We will have the Financial Policy Committee looking at emerging threats to financial stability, and both our introduction of the Vickers reforms and the rules of the Prudential Regulation Authority will help to ensure that the ring fence is kept up to date and meets not just the needs of business, but the need for a strong and stable economy.