RegulationJul 9 2013

Tyrie slams ‘weak’ amendments to banking rules

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Andrew Tyrie, chairman of the Parliamentary Commission on Banking Standards, has slammed the government’s response to its final report on reforms in the banking sector, stating that the government has “fallen short on a number of important points”.

The Banking Reform Bill, which is currently before Parliament, implements the recommendations of the Independent Commission on Banking, led by Sir John Vickers, which included introducing a “ring-fence” separating everyday banking activities from investment banking activities.

Yesterday (9 July) the government published its final amendments to the proposals in response to a subsequent report produced by the banking standards commission, which was tasked with reviewing ethics and culture in the wake of the Libor scandal, among others.

While Mr Tyrie ‘welcomed’ elements of the response, which implements the broad tenet of both reports, including plans to introduce criminal sanctions for “reckless” bankers, he vehemently criticised amendments that he says will significantly ‘weakened’ the rules.

In particular, he criticised changes to the banking ring-fence, which the government had said it would ‘electrify’ following recommendations put forward by Mr Tyrie’s commission.

Amendments include a requirement for the Prudential Regulation Authority to commission a report into any application for a ring-fencing transfer, including a statement of whether third parties are likely to be adversely affected by the scheme.

Mr Tyrie said: “The government’s support for many of the major recommendations contained in the Banking Commission’s final report, and particularly the arguments for them, is very welcome.

“The commission’s original recommendations for a specific power of electrification were welcomed and supported by the government. They were designed to deter attempts by banks to game the ring-fence.

“The amendment tabled by the government today renders this power so weak as to be virtually useless. It would barely give banks pause for thought.

“To give effect to the commission’s proposals, the government will need to introduce substantial improvements in the Lords.”