This Bill is really a response to the banking crisis of 2008. It aims to set up a new framework for the regulation of the banking industry to try and prevent this happening again.
Labour's failure to regulate the banks properly has cost the taxpayer billions. That is why the Government are abolishing their failed tripartite system, and moving bank regulation to the Bank of England.
In the second reading of the Bill held today I questioned the Chancellor about the lessons that we could learn from the last Government's mismanagement in how to better regulate the system.
With the tripartite system, of which I believe the shadow Chancellor was the architect, a tick-box culture of regulation grew—a one-size-fits-all approach, and that sort of thing. Can the Chancellor tell the House a bit about how we will get rid of that tick-box culture and move towards a culture of more individual and tailored regulation?
The key thing is to empower the regulators both to exercise judgment and then to be able to do something about it. My hon. Friend is right: there was no shortage of regulation, in that sense, in 2006-07. RBS complied with every bit of regulation in its decision to try to take over ABN AMRO; it is just that no one felt empowered to say, "Is this the right thing, for this firm and for the financial system, at a point when the financial markets have already frozen up?"
Rather than wait for this legislation to pass through Parliament, we have gone ahead and created the Financial Policy Committee on an interim and non-statutory basis. It is already meeting regularly to assess risks across the financial system, such as the need for banks to provide for adequate capital before determining the distribution of profits, as well as drawing attention to specific products, such as exchange-traded funds, whose excessive use may be a cause for concern. It has already produced two impressive financial stability
There was also an opportunity to quiz the Shadow Chancellor on his shifting position to banking reform. You can see our exchanges here
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