Financial Services Bill

My Lords, I will pick up the remarks made by the noble Lord, Lord Whitty, about the FSA. It is rather remarkable that we are asked to stand here and say that the FSA is the most magnificent organisation and should be left in place. It seems quite obvious that the FSA has failed abysmally. This is despite the assurance that I have been given by the noble Lord, Lord Myners, and which was mentioned earlier when we discussed my amendment, that all the people responsible for banking regulation have been moved over into the FSA. So in theory, if everything was going to go on as it was before, under the Bank of England, the regulation of banks would continue and that would all go very smoothly. Quite clearly, when we look at Northern Rock, that was not the case. Northern Rock was an abysmal failure, and much of the blame has to be placed at the feet of the FSA. One of the problems which the noble Lord, Lord Whitty, might admit is that when it comes to regulation, the people who are sharp and on-the-ball and make a lot of sense go off and make money and earn enormous bonuses and God knows what else. The people who cannot do it—and I hate to say this and have no wish to demoralise the FSA—are the people who end up working as regulators. So they are all behind the curve anyway and the people they are trying to regulate are a hell of a lot cleverer than the people in the FSA. If we look back on the Bank of England, it had a much better reputation for being slightly ahead of all the people it was trying to regulate, rather than behind them. That is certainly not true of the FSA, which proved itself to be very good at protecting consumers—taking up complaints from people who had invested their money wrongly—and I have no objection to the role it played doing that. However, when it came to the big decisions, as to whether it should actually move in on Northern Rock, and deem the whole of its business plan completely faulty, totally indefensible and unworkable because it was borrowing short-term money and lending long, that is when the FSA completely failed. Therefore, I cannot understand why we should have any confidence in the FSA.