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Banking Bill

My Lords, this is a revised version of the amendment that we debated in Committee. It would require the Government to produce, as soon as practicable after the Act comes into force, a report examining the case for separating investment banking from deposit-taking, either entirely or as part of a clearly segmented holding company. When we debated this in Committee, the noble Lord, Lord Eatwell, asked the Minister whether he was familiar with the G30 report which had been produced in the previous week. In reply, the Minister said that he would study it as soon as he had the opportunity. Given that I know he spent the entire weekend reading, I hope that he has indeed had the opportunity. In case he has not—and for those noble Lords who equally might not have waded through this extremely technical document—I should like to draw attention to the relevant conclusion of the report which, in typical bankese, states: "““Large systemically important banking institutions should be restricted in undertaking proprietary activities that present particularly high risks””," and serious conflicts of interest. The report is referring to exactly the problem that we have had in this country with the large banks, which have started life as deposit-takers, become investment banks and have ended up running a casino which has broken the bank. The importance of the G30 report is not simply in the content of the report, but in the fact of who chairs the committee. The committee which produced it is chaired by Paul Volcker and he will be one of the key advisers to President Obama on all these matters in the months going forward. Therefore, one could assume that this matter will be actively considered by the Administration, and not just the regulators, in the United States. This issue was raised by the noble Lord, Lord Turner, in the Economist’s Inaugural City Lecture on 21 January. He said: "““A crucial issue for regulators is therefore going to continue to be how we regulate the very large and very complex systemically important banks which are too big to fail and which are involved both in narrow banking and in complex treasury and trading activities””." The precise ways in which we achieve this end will need to be carefully considered. He then said: "““I am not convinced however that this can or should take the form of any absolute separation between institutions””." It is absolutely clear that the FSA is going to be considering this along with the range of other issues which it is looking at in terms of how to make banking regulation more effective. The assurance which I seek from the Minister is that this should not be thought of by the Treasury as a technical issue to be left to the FSA. It goes to the heart of whether we are going to have a banking system which is fit for purpose in the future and a banking system which is going to have the confidence of the British public. As both the Treasury and the FSA look at a whole raft of ways in which the regulatory framework is amended in the future, I do hope that the Treasury is going to take this matter extremely seriously and not simply leave it to the FSA to look at.