Banking Bill

Of course. The primary responsibility lies with the banks—I agree with that—but we do not leave the fate of the nation entirely in the hands of the banks, for good and obvious reasons. We therefore have a regulator and regulations with which the banks are meant to conform. They had a silent regulator who saw nothing wrong with what was happening and the Government presided above them, taking credit for the boom conditions that were breaking out. In my day, regulation was carried out wholly by the Bank of England. I do not think that we will ever go back to that, but it worked rather well. We had one bank that went bust—Barings—and I think that might have been why the present Prime Minister decided to change the regulatory arrangements. I have never quite worked out why he wanted to change them, but there is no protection against a deliberate fraud when the management of the bank are ignorant of what is being done in Singapore by a fraudulent employee. The Bank intimately knew the banking system and took its regulatory processes extremely seriously. The only explanation that I have heard from the then Chancellor's friends is that he thought that he would make the Bank too powerful if he made it independent on monetary policy while allowing it to keep its regulatory duties. I do not understand that, but he set up the new arrangement and so far, plainly, it has not worked. The Bill tries to address that problem and that is welcome, so far as it goes. At last, a statutory footing is at least given to the Bank of England's responsibility for financial stability. That is a very vague phrase and giving the role a statutory form does not alter present practice, although it gives a vague overall responsibility to the Bank, which is also given statutory immunity when it exercises that responsibility. That is all well and good, but the Bill also gives the Bank a responsibility to execute the new regime—the special resolution regime—in which alternative paths can be followed to step in when a bank fails to ensure that it does not threaten the system and is kept trading. That is going on now. Although the Bank is given a role in the regime, whether the regime is triggered is dependent on the opinion of the FSA. The Chancellor has said that the system works quite well and that the system set up in the 1998 legislation has led to a clear division of responsibilities between the various players. I do not believe that it has. I have not been intimate to the discussions but along with 60 million others I can see with the evidence of my eyes that the system has not worked at all. I can see that when I read the newspapers and could have seen it in my bank balance had I happened to have had a at-risk deposit with an Icelandic bank—I have not been so unfortunate. If we go back to the example of Northern Rock, it was quite obvious at the time that the three parties to the tripartite arrangement did not agree. They were shovelling blame on to each other at various times and had totally different approaches to what exactly to do in the short term. I said this at the time, so I shall not repeat it too much, but in the middle of it all the Government did not have the first idea of what to do. Now, they are taking the credit for taking the lead in solving the global crisis—that is, in how to deal with the insolvent banks.