I agree wholeheartedly with my hon. Friend, and I hope that he agrees that all the effort that has gone into setting up this new regime—in particular the senior managers regime and the certification regime—is a huge step forward in achieving that aim.
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The Government are committed to bringing branches of foreign banks and investment firms that operate in London into the regime. At the same time, such a shift may be disproportionate for some small branches with few real decision makers, and the Government will consider the case for not extending the regime to such branches in due course.
I do not accept Lords amendment 41 because it would do nothing other than rename the existing approved persons regime as a licensed persons regime—that is about all it does. It would not deal with problems with the existing regime identified by the Parliamentary Commission on Banking Standards, or deliver the improvements recommended by that commission. I assure the House that, under the Government’s approach, which is based on the commission’s recommendations, firms will have to certify that people who perform roles through which they could do significant harm to the firm or its customers are fit and proper to perform those functions. That will include ensuring that they have received suitable training and have any relevant qualifications required by the regulator. That will not be a one-off check; it will be done annually.
The Opposition amendment would place all the burden of raising banking standards on the regulator. The PCBS concluded:
“Banks should not be able to offload their duties and responsibilities for monitoring and enforcing individual behaviour on to the regulator or on to professional bodies. The tools at their disposal have the potential to be much more usable, effective and proportionate for the majority of cases than external enforcement,”.
That is the approach the Government have adopted in their amendments. They place clear responsibility on the banks to ensure that anyone who is appointed to a post where they might cause significant harm to the bank or its customers, is fit and proper and able to perform their role. That will require consideration of the person’s qualifications, characteristics, experience and training, and the banks will have to consider each year whether that person is still fit and proper to continue in that job.
The regulator will specify those functions that may cause significant harm to a bank or its customers in rules, and can specify what qualifications must be held by anyone appointed to that role. The bank’s implementation of that regime will be subject to monitoring by the regulators, who will be able to take enforcement action against any bank that does not meet requirements laid down by the regulators.
The Government have worked tirelessly to replace the failed system of financial regulation we inherited from the previous Government. We supported the PCBS in its work and are implementing its recommendations. It seems that all the Labour party can offer at this point is a change of name. I therefore ask the House to reject Lords amendment 41.
Another key recommendation of the PCBS is the introduction of a new criminal offence of reckless misconduct in the management of a bank. The introduction of such an offence means that, in future, those who bring down their bank by making thoroughly unreasonable decisions can be held accountable for their actions, which, as we have seen, can lead to severe economic disruption and considerable losses for taxpayers.