I do not think it is particularly democratic to give the authority directly to the Chancellor of the Exchequer, but I understand what he means if he thinks that Parliament should be given some opportunity to debate the issue. It is possible that some scope for flexibility could be built in to reconcile the point that he is making and the point that the commission is making. What would be unacceptable would be for the legislation to reach the statute book without a power of general separation and without there having been a thoroughgoing independent review. If those are in place, the extent to which Parliament can be involved a second time, and
the extent to which the Chancellor himself should trigger that involvement, is something on which we could show flexibility.
I said that I hoped the Chancellor would think carefully about leverage and general separation, but there are a good number of other issues to which I hope he will give some thought, most of which have, at least briefly, been mentioned so I will not linger on them. I know that other Members want to speak, so I shall cite just three or four.
On derivatives, the Government appear completely at odds with the Vickers review and somewhat at odds with a slightly modified version of the same point that has been put forward by the commission which I chair. I will not delay the House now by going into the detail.
I hope the Chancellor will also consider a point that has scarcely been raised so far today—the need for the imposition of the so-called sibling relationship between the two parts of the ring-fenced bank under a single holding company, rather than the parent-child relationship, which was originally proposed in the Vickers report and which the Government still support. There are good corporate governance grounds and other grounds for supporting that proposal, which won widespread support in evidence that we took on it.
I hope the Chancellor will also think carefully about the way in which individual banks demonstrate whether they should benefit from a PLAC exemption—an exemption from the requirements of primary loss-absorbing capacity. This is a complex area which mainly affects banks headquartered in the UK with large overseas subsidiaries and branches. It is an issue which needs to be approached with considerable care. We thought very carefully about it and came forward with a balanced recommendation. On that, too, so far I have not seen enough flexibility from the Government.
The issues in the Bill are crucial for Britain. The industry is a great one, but it has serious problems. The Bill will address only some of the sector’s structural problems, and there is a lot more to be done. The parliamentary commission expects to produce its final report in May and that will seek to address some of the wider issues, the problems of standards and the culture in banking. We have just had a shocking LIBOR scandal and the wholesale rigging of crucial wholesale markets, and we have seen the equally shocking rip-off of consumers in the payment protection insurance scandal and of small business in the interest rate swap scandal. Those and other revelations, which have included sanctions busting and money laundering, reflect deep-seated problems of standards in banking.
Neither the Bill nor our proposals in May, nor for that matter any global initiatives under way, will solve all those problems. In fact, many of them will perhaps take many years—decades—to address. But something can and should be done, and that is why the Government are right to have made a start with this Bill. I very much hope that they listen to what the commission has said about it, because if they improve it further, along the lines that we have proposed, it can make a substantial contribution to a much stronger banking industry in Britain.
5.36 pm