Independent Banking Commission Report

Stewart Hosie Excerpts

Monday 12th September 2011 Commons Chamber

[Mr Osborne]

Well, it was not much of a golden egg, unfortunately, in recent years. It is important for this country that London, Edinburgh and other centres remain globally competitive and that London remains the pre-eminent global centre for finance. Some of the changes taking place in the City, such as the one I mentioned, involving trying to develop an offshore renminbi market, are all part of London being a competitive place to do business. However, being a competitive place in which to do financial services does not mean that there has to be a huge taxpayer subsidy for universal banks and their retail banking arms in the UK. John Vickers explicitly deals with the competition issue. People might have expected him to come to a different conclusion on this, but one of the interesting things he said was that we should not impose additional capital-to-equity ratios on investment banks, precisely because he does not want us to make them internationally uncompetitive.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Chancellor for his statement, and for giving me early sight of it. I congratulate the commission on the report, and particularly on the report’s dealing with the resilience in the banks and its rejection of splitting up the universal banks in favour of flexible ring-fencing. However, the timetable for this is eight years from today until the final implementation. That is necessary because of the complexity and the potential cost to the banks of implementation, but will the Chancellor ensure that the banks do not consider the next eight years to be a hiatus during which they can return to business, and bonuses, as usual? Will he also ensure that he drives forward as many of these recommendations as he can as quickly as possible before the 2019 backstop?

[Mr Osborne]

I will not repeat what I have said about the timetable. Suffice it to say that it is what John Vickers recommended, having really thought about it. This involves a combination of getting the detail right and ensuring that the changes do not unduly damage credit supply in the short term. That is why he has recommended a longer timetable. As he pointed out at his press conference this morning, once we propose such changes and start to legislate for them, some of them will start to happen anyway as banks try to get ahead of the curve—that is certainly what happened with Basel, although they were arguably too quick to get ahead of the curve in that instance—and that is what he anticipates happening when the changes are introduced.