The fact that an individual is found responsible should not in any way exculpate the institution from its own responsibilities. On the other hand, a key recommendation of the Banking Commission was to restore individual responsibility. To return to a situation where it is primarily the institution that carries the can for what had been a series of individual pieces of bad behaviour would be a profound mistake. There is a lot behind the exchange we have just had that I am not going to go into now, but which we thought about quite deeply on the commission. I shall now move on as there are a few more remarks I want to make about this group of amendments.
Everyone now seems to be agreed that the APR adds little or nothing, yet over the past few weeks we have discovered that the discredited APR will survive in legislation. In doing that, the regulators are perpetuating a myth that the APR affords any real protection. It will continue to apply to several groups. First, about 20,000 people in the financial services industry outside banking will still be covered, mainly in fund management and insurance.
This is unfinished business. The Banking Commission had the remit to look only at banking. It would be absurd to retain a system for one part of financial services that has so clearly failed in another. The Government and Parliament both need to encourage the regulator to look at this and do what is necessary to extend the coverage of the new regime and to remove the APR from other parts of financial services. To rely on the APR is asking for trouble.
It is also regrettable that the APR will remain in a few isolated pockets within the banking industry. This is because the APR will continue to apply to firms’ LIBOR submitters and to persons with anti-money laundering responsibilities in banks. This amounts, I gather, to only a few dozen people, but I think it would be far better if we removed what amounts to “triple running”. We will have three layers: the senior persons regime, now called the senior managers regime, licensing, now called certification, and the APR in the case of these people. The extra APR layer confers no extra protection, but adds bureaucracy and creates a business cost. There will be plenty of scope for legal wrangling in the event of a regulatory failure, given the great scope for confusion, and for an equal measure of recrimination by regulators who will say they were asked to do too much by Parliament. Banks will have a point when they complain about that. For all those reasons, I hope that the Government will come back to this issue and remove the APR from banking entirely in due course.
The Banking Commission’s proposals do not guarantee better standards. Much will depend on the judgment of regulators and the common sense of the banks, but identifying responsibility for key roles offers a much better prospect of higher standards than does retaining the APR. The commissioners are delighted that our proposals on this are now going to be put on the statute book.