Let me apologise to the Minister at the start, because I will miss his winding-up speech. Unfortunately, I have to rush back to Kidderminster for an important meeting about Kidderminster hospital. Members who remember the 2001 general election will know that any Member of Parliament who does not pay attention to Kidderminster hospital when called upon can suffer dire consequences.
I am grateful to my hon. Friend Andrea Leadsom for securing this debate and for gathering such enthusiasm for it. It is an incredibly important issue in the regeneration of our economy.
I specifically want to turn the focus of attention to the problem that arises when a regulator is still reeling from the fall-out of the banking crisis. Here we are, nearly half a decade on from the crisis, and we have just started a new round of scandal as the results of the FSA investigation into LIBOR fixing hit the headlines. The story will no doubt run and run for some time as other banks are brought into the mire. The Government’s response—the so-called Tyrie commission—is as good a start at understanding the problems as I can imagine, and, I hope, a significant step in the direction of truth and reconciliation between the banks and the taxpaying consumers.
The FSA’s response to the banking crisis has been reactive, and it is in its reaction that significant barriers have been established that limit competition in banking. Over the past few months, my hon. Friend the Member for South Northamptonshire and I have been meeting a number of smaller, existing banks as well as potential challenger banks to the banking marketplace. In nearly every case, their experience of the FSA has been problematic. All parties concerned were either small banks—banks with balance sheets under £2.5 billion—or individuals representing organisations that had experienced the FSA’s application process. Those interested parties came forward with points about the FSA’s process of issuing banking licences, and the regulator’s attitude to, and regulation of, smaller banking institutions.
It is significant that just one of the organisations we met detailed a positive experience of the FSA and its practices. It is also worth noting that banking licences are very rare commodities. There has been just one ab initio banking licence granted in the past 100 years and that was to Metro Bank. All other new entrants to the market, such as Virgin Money and Tesco, have done so as a result of buying existing licences and transferring their use to the new operation, or from overseas banks passporting in their expertise. That in itself says a great deal about banking competition in this country.
I want to concentrate on two specific areas of concern: the FSA’s application process for banking licences, and the FSA’s regulation of smaller banks.