I just said that I intend to be constructive and to pursue the approach that we have taken. If the hon. Gentleman will be patient, I will respond shortly to that particular recommendation.
Let me summarise the principal contents of the Bill where they reflect the advice of one or both of the commissions, before I set out the areas in which we take a different view. One of the central recommendations of the Independent Commission on Banking is that the UK banks should ring-fence
“those banking activities where continuous provision of service is vital to the economy and to a bank’s customers.”
That recommendation has attracted widespread support, and the Bill creates the basic architecture of the ring fence by making it an objective of the regulator—the Prudential Regulation Authority and, if necessary, the Financial Conduct Authority—to secure the continuity of core services by preventing ring-fenced bodies from exposing themselves to excessive risks, by protecting them from external risks, and by ensuring that, in the event of failure, core activities can carry on uninterrupted, the so-called resolution objective. The core activities are defined, as recommended by Vickers, as the taking of retail and small and medium-sized enterprise deposits and overdrafts, but they can be added to if required through secondary legislation.
In response to the parliamentary commission’s recommendations, the Bill is now clear that to be ring-fenced means that the five so-called Haldane principles of separation should be followed, namely that the ring-fenced
bodies should have separate governances, including boards; remuneration arrangements; treasury and balance sheet management; risk management; and human resource management. As the parliamentary commission has also recommended, directors of banks will be held personally responsible for ensuring that the ring-fence rules are obeyed. The parliamentary commission also made a recommendation that the ring fence should be electrified. That is to say that, if the rules are breached, the banks should be forcibly split.
While the Bill is before the House, the Government will bring forward amendments to provide a power to require the full separation of a banking group, where, in the opinion of the regulator and the Government, such separation is required to ensure the independence of the ring-fenced bank. As hon. Members know, the parliamentary commission made a further recommendation for a power to trigger separation of the entire system, which I will come to shortly.