Financial Services (Banking Reform) Bill

Baroness Cohen of Pimlico Excerpts

Tuesday 26th November 2013 Lords Chamber

I am very grateful to the noble Lords, Lord Barnett and Lord Peston, for calling a spade a spade, and acknowledging in this amendment that full separation is an alternative policy to ring-fencing, not a complement. To take that alternative would be to abandon the ring-fence. It would be contrary to the weight of evidence and analysis assembled by the ICB, without being grounded in a robust evidence base of its own. It would be a policy based purely on assertion and scepticism. The Government cannot accept that, so I call on the noble Lord to withdraw his amendment.

[Baroness Cohen of Pimlico (Lab)]

My Lords, I have spoken before against ring-fencing and for full separation. We may not be in any kind of agreement on that, but what we ought to be in agreement on is that ring-fencing will require particularly scrupulous and detailed regulation. It will require more of our regulators than full separation, because institutional separation to some extent requires less regulation.

I wonder whether we are quite sane in putting so much faith in our regulators. The people who gave us Mr Flowers as chairman of the Co-operative are hardly those I feel very confident about exercising the very complex regulation that ring-fencing will require. It is complex and it is difficult. It is more difficult than it needs to be than with the policy of full separation. I therefore continue to support my noble friend Lord Barnett in his amendment.

[Lord Barnett]

My Lords, the Minister has told us that the Government consulted widely and got agreement. Well, more recently, there were 300 professionals who were consulted in a survey and only 35 of them thought it would work. I do not know who he consulted. He also talked about the robust regulations. Who is going to supervise these robust regulations—the old FSA, now called the FCA? Is he confident that it can? I am certainly not clear myself, nor do many people have a lot of confidence that the old FSA, now the FCA, can do that job. He is confident, however, that it can.

My noble friend Lord McFall pointed out what Volcker said to that committee: the chairman of a holding company, of which some part got into trouble because of the lack of regulation or whatever—what would he do? I know what he would do. He would seek to save it. These merchant banks may lose money at times—indeed they have done—but most of the time they make a lot of money and do not want to lose it. They want it separated, but under the same roof, with one holding company. That is what they have got and are going to get under the new administration.

I cannot see this regulation working and would like to hear the views of any other Member of the House who has an interest in this.