Banking (Special Provisions) Bill

The reason we are here today is that, uniquely among any of the 192 countries in the world affected by the credit crisis, we have suffered a run on a bank. The banking supervisory regime failed to spot the risks posed by the reckless business model of Northern Rock, and when the risks were finally spotted, the tripartite authorities failed to act decisively—mainly because no one was clearly in charge. The reason for that is the failure of the present Prime Minister and Chancellor—when, as Chancellor and Chief Secretary, they introduced the new banking supervisory regime—to anticipate what might happen in a significant financial crisis. No stress testing was carried out for the possibility of a major bank getting into serious difficulty. That barely seems credible now, but that is what we established through the Treasury Select Committee. We are now presented with a Bill that, according to the Chancellor, will give the Treasury the power to determine threats to the financial stability of individual institutions. As many Members have pointed out, this will apply not only to Northern Rock but across the banking and building society sectors. The Chancellor's arguments for the Bill, and his recent actions, show that he is obviously confused. He says that the Bill is needed to provide for clear management accountability at Northern Rock, but he also says that he wants to consult in the coming months on the regime to improve the management of financial stability in the UK economy. Why, then, is he pre-empting his own review by using the Bill to give the Government wide-ranging powers that go way beyond the problems of Northern Rock and will extend to all deposit-takers? The Chancellor is ignoring the recommendations of the Treasury Committee's report—and pre-empting his own response to the report, which has not yet been published—by giving powers not to the Bank of England, as the Committee recommended, or to the Financial Services Authority, as he had flagged up in speeches last month, but to himself and the Treasury. What confidence can we have in the ability of Treasury Ministers to take the necessary decisions provided for in the Bill? One of the Ministers now sitting on the Treasury Bench appeared before the Treasury Committee the other day, and when she was asked what experience she had in financial matters, gave the extraordinary response that she had a big overdraft. It is barely conceivable that we should place responsibility in the hands of Ministers who have little, if any, experience of handling banking matters, rather than in those of the professionals whom they pay—through the Bank of England or the FSA—to take such responsibilities. This nationalisation raises a host of questions about the role of banking supervision and the relationship between the FSA, the Bank of England and the Treasury. Given the way in which the Chancellor is taking such peremptory powers for himself, he owes it to us during the course of this debate to answer certain key questions. Is there any longer any credence in the independence of the Bank of England? What should the Bank of England be responsible for, operationally, if not for the provisions in the Bill? Can the UK regulatory structures cope with the complexities and rates of change in the modern financial world? What is the role for the Bank of England? And where is the experience among those in the Treasury to exercise the powers that they are giving themselves in the Bill?