amendment of the Law

Part of Budget Resolutions and Economic Situation – in the House of Commons at 12:36 pm on 21st March 2013.

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Photo of Vincent Cable Vincent Cable The Secretary of State for Business, Innovation and Skills 12:36 pm, 21st March 2013

There already are regulations that affect bankers’ bonuses, which we introduced long before the European Parliament and which firmly cap the amount of bonuses that can paid out in cash, as opposed to stock, which is not redeemable in the short run. That reform has already been made in order to stabilise the banking system.

I agree that the banking crisis did enormous damage. As someone who has probably spent more time thinking and writing about it than most people in the House, I acknowledge that I have underestimated the damage that was done by the collapse of the banking system, especially the crippled, semi-state owned banks—to such an extent that even if we now ordered those banks to lend more, they would be institutionally incapable of doing so. What we have realised is that there are two problems. The first is the problem that has arisen from the banking collapse itself and the de-leveraging that followed it. The other is the fact that over a decade ago the bankers stripped out their capacity for local relationship banking. Effectively, they looted their banks and denuded them of the capacity to engage in sensible business lending. Of course, that was anticipated in the Cruickshank report, which the Labour Government ignored, but it has done serious damage that makes it difficult to revive conventional business lending. We are trying a series of initiatives to do that.

On Friday, a new tranche of money will be made available for non-bank lending. Today, we had the advanced manufacturing supply chain initiative, which is helping to fund our supply chains. I put in the Library this morning a written ministerial reply on the business bank, which gives a time profile for how that new institution will support challenger banks and new forms of wholesale financing in the banking sector. The Chancellor’s speech yesterday included a positive initiative on equity capital and helping to relieve some of the burdens on companies going to the alternative investment market on the equity side.