Banking Reform

Michael Meacher Excerpts

Thursday 17th June 2010 Commons Chamber

[Mr Hoban]

My hon. Friend makes a good point about who takes control in a crisis. My right hon. Friend the Chancellor was very clear yesterday that, given his responsibilities in respect of public finances, he will ultimately be in charge in such situations.

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

Since the direct causes of the financial crash were colossal bonuses that drove recklessness, the use of fancy structured investment vehicles including sub-prime mortgages, the conflict of interest whereby credit rating agencies and auditing companies are paid by the company that they are supposed to be assessing and, above all, the overly lax culture of light-touch regulation, what precise, specific mechanisms is the Financial Secretary putting in place to deal with each of those underlying problems as opposed to merely shifting around the institutional infrastructure, which is all he appears to be doing?

[Mr Hoban]

I am grateful to the right hon. Gentleman for his comments. He takes a close interest in these matters. Of course, he will remember that in 2006 the right hon. Member for Morley and Outwood (Ed Balls) praised the system of “increasingly light-touch” regulation and claimed that he had

“resisted pressures from commentators for a regulatory crackdown.”

The right hon. Member for Oldham West and Royton (Mr Meacher) ought to take up some of these historical issues with his own Front Benchers.

As regards a change to the regulatory approach, we need to see a move away from the prescriptive, box-ticking approach that we have seen in a recent years to a system in which the PRA and the CPMA can make more judgmental decisions about what is happening in the markets they supervise and with the prudential decisions that individual institutions are taking. If we put judgment at the heart of the system, we are more likely to avoid some of the issues that we have seen arise in recent years.