We need your support to keep TheyWorkForYou running and make sure people across the UK can continue to hold their elected representatives to account.Donate to our crowdfunder
My Lords, like the noble Lord, Lord Turnbull, I was a member of the Parliamentary Commission on Banking Standards. I find myself in much the same place as the noble Lord and I will not repeat, therefore, all the things he has said.
My greatest concern is that there was, sadly, in British banking examples of grotesque incompetence and irresponsibility right at the top, as has been borne out most recently in the report by the Bank of England and the PRA on HBOS. It would be hard to read a more damning indictment although, as the noble Lord, Lord Turnbull, pointed out, it does not say anything further than we said in our own report—that it was an accident about to happen—which was largely written by the noble Lord, Lord Turnbull.
In addition to this grotesque irresponsibility and incompetence, for which the then chairman and senior executives of HBOS have not been adequately penalised, in my opinion and that of the Banking Standards Commission, serious wrongdoing was widespread throughout banking—although, as we all know, not all bankers were guilty of it. What happened? Eventually, after delays, the banks were fined huge amounts of money by the appropriate financial authorities. That is not only counterproductive but is seriously against the national interest. We want banks to be adequately capitalised, both for them to be safe and to be able to lend more, particularly to SMEs. It has meant that something like £1 trillion of bank lending has not happened because of the fines the banks have had to pay.
It is not the banks that are guilty of wrongdoing but the bankers, and it is important for this change of emphasis to occur. The only people who suffer when the banks are heavily fined—apart from the small businesses which cannot get loans because the capacity is less—are the shareholders, the one group of people who are completely innocent, who have done nothing wrong. It is important to change the way in which we deal with this and get at the individuals in senior management who are responsible.
That will also have a beneficial incentive effect which the present regime does not have. If senior executives on the board and chairmen—this should not apply to non-executive directors other than chairmen —say, “We did not know this was going on”, they are clearly liable to be found guilty of negligence. One suspects that some of them took great care that they should not know what was going on. This is not a reversal of the burden of proof, any more than a captain in the Royal Navy can escape liability when his ship runs into the rocks by saying to the court martial that the boatswain was at the wheel and he did not know. The captain is responsible and the senior people in an institution are responsible and must be punished.
I hope the Minister can reassure us that, without this amendment, the Bill will do just that; that the responsible authorities will see to it that this sort of regime is carried out; and that no more will we have banks fined enormous sums of money at the expense of dealing with the individuals who are responsible for the wrongdoing.