Financial Services Bill

My Lords, I support my noble friend Lady Noakes in her opposition to these clauses standing part of the Bill. I firmly believe that it is necessary that the Bank of England should again assume ultimate overall responsibility for financial supervision. Call it macro, micro or what you will, the separation of the macro from the micro was undoubtedly a contributory cause of all parties’ eyes being somewhat off the ball as the financial crisis developed. The noble Lord, Lord Newby, suggests that three-quarters of those who work in the City do not agree with my party’s solution to the problem, to re-empower the Bank of England as being in overall charge of financial supervision. However, what answer does the noble Lord think he would get if he asked people who work in the City whether they think that the FSA has correctly and properly conducted financial supervision over the 10 years or more that it has been in existence? He might find that, again, at least 75 per cent of those who answered said no. In my experience, most people think that the FSA was too much an internal organisation, having meetings with itself or going to harmonisation conferences all the time and not actually spending enough time on prudential supervision. Why? Because it was separated from the real, ultimate responsibility for the macro-prudential supervision, which was at the Bank of England. Whether the FSA is completely abolished, or is simply made to report to the Bank of England with regard to prudential supervision, does not matter so much. If the noble Lord asked people in the City whether they thought that the FSA ought to report ultimately to the governor or to the Bank of England, again he would find that a majority of practitioners supported that view. It is clear that Clauses 1 to 4 are purely cosmetic and that the financial stability council is no different in composition or function from what was there before. It is a totally inadequate response to what has happened, and therefore I wholly support my noble friend’s opposition.