The chairman of the now disbanded Parliamentary Commission on Banking Standards has warned of the dangers of diluting banking reforms.
Conservative MP Andrew Tyrie, who is also chairman of the Treasury select committee, was speaking after the recent Forex scandal which saw the FCA fine five banks a total of £1.1bn for manipulating the foreign exchange market.
He said the fines showed there was a long way yet to go.
Mr Tyrie said: “As time passes, the pressure for reform will weaken.
“The old system failed disastrously – the Forex settlement is a stark reminder of this.
“Maintaining or resuscitating parts of the failed system, whether at the behest of bank lobbying or for the convenience of regulators, must not be permitted to happen.
“Progress has been made since the commission was established over two years ago, but there is much still to do.”
A 30-page report on the implementation of the commission’s recommendations, Statement by former members of the parliamentary commission on banking standards, sets out how several of them were only included in legislation after lobbying – such as a statutory review of whether the bank ringfencing is effective.
But it went on to say that further changes are needed to improve the UK’s banking system.
The report said: “Resolution measures, alongside ring-fencing reforms, are crucial to removing the implicit taxpayer subsidy that has been enjoyed by major banks, and has led to severe lapses in standards.
“But a working resolution regime remains a goal rather than a reality.”
The Treasury did not respond to invitations to comment.
Background
The government’s Financial Services (Banking Reform) Act 2013 became law in December 2013, and introduced a ring-fence between high street banks and investment banks.
It also imposed higher standards of conduct on the banking industry by introducing a criminal sanction for reckless misconduct that leads to bank failure.
Work to implement the ring-fence is still ongoing, and the regime will not come into force until 2019, with no date set for the provisions to be formally activated.
Adviser view
Simon Webster, managing director of Kent-based Facts and Figures financial planners, said: “There is a fundamental mismatch in the interests of banks which trade their own money and their customers’ money, and until that is addressed banks will not really be reformed.”
