I do not necessarily agree. I speak not only as a Member of Parliament, a member of the Parliamentary Commission on Banking Standards and a member of the Treasury Committee but as a former investment banker and investment manager. My hon. Friend the Financial Secretary is also a former banker, so to a certain extent we have a private interest in ensuring that banking standards are greater than they have been. There has, however, been an enormous amount of progress. We have a new regulatory regime, there have been a number of changes in the banks and we have seen a complete change of culture at the top of many of the banks. Things are moving in the right direction but it will take a long time and this Bill is part of that process.
Although we are all trying to achieve the same thing, the important question is how we will achieve it and who, ultimately, we should ask to ensure that the licensing
regime is upheld and looked after. The Parliamentary Commission on Banking Standards was perfectly clear that we felt that the approved person regime was complete and utter nonsense. One of the Bank of England’s greatest thinkers, Andy Haldane, highlighted why that was the case: if regulation is devolved to a regulator, all that happens is that the individuals at the head of the banks think that they have nothing to worry about. It becomes the regulator’s problem to worry about such things, and not that of those individuals.
When we met a number of the banks—particularly UBS, the Union Bank of Switzerland, the senior directors of which appeared in front of us just after it had been fingered for its share in the LIBOR scandal—we discovered that there was an incentive to be ignorant of what was going on within them. The senior managers of UBS who were running the bank when the LIBOR scandal happened within their organisation knew nothing about it until they read about it in the Financial Times three or four weeks before our hearing. That gave rise to the accusation that there was an accountability firewall between the management of the banks and the individuals working on the front line—that is, those at the coal face on the dealing room floors and servicing our consumers.
We were trying to work out how on earth we could reach a system in which those at the top of the bank took accountability for the work and standards of the individuals in the lower part of the bank. That is crucial in leading me to support the Government in rejecting amendment 41: it does not deal with that accountability but rather gets around the problem. That is why it fails to hit the nail on the head.
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The people running the banks must at some point wake up at 3 o’clock in the morning in a muck sweat worrying that some decision or lack of decision that afternoon or that year will result in a serious problem in the organisation. If they think that the regulator will take responsibility, they will not take that personal interest. That is crucial.
Over the three years for which I have been a member of the Treasury Committee, and particularly over the past year for which I have been a member of the Parliamentary Commission on Banking Standards, I have had the opportunity to meet a great number of senior bankers. Most have come on to the scene since the crisis and, in some cases, since I have been elected, and I am convinced of the sincerity of their desire to do the right thing in those organisations. They genuinely want change. They see reputational risk as a commodity that affects them and want to do something about it.
To that end, the banks have got together and employed the wisdom of Sir Richard Lambert, who is looking into setting up a professional standards body for the banks. The banks will run it, pay for it, finance it, ensure that it works and put it in place. We have some good thinkers working on that and it is symptomatic of the fact that the banks want to change their culture.
An organisation such as HSBC has 270,000 people working for it, so no matter how sincere the integrity of the individual at the top, we must work out a mechanism to drive integrity throughout the system. Personal accountability for the senior management of the banks is crucial in that. I keep coming back to this point: if
Douglas Flint is waking up at 3 o’clock in the morning worrying that somebody in Kidderminster is getting something wrong, that is a good thing.