Tyrie: Don’t give in to special pleading from banks

The chairman of the Treasury select committee said it would be as unacceptable for the public finances for large, systemically risky banks to be allowed to continue as would be unsustainable politically.

“The tax paying public’s tolerance of another bail-out is low, to put it mildly. And the public are right. Millions of taxpayers would be vulnerable to paying for another bail-out if the largest and most complex banks cannot be resolved,” he said.

Mr Tyrie said he was concerned that persistent bank lobbying could “undermine efforts to ‘ring-fence’ the banks’ retail operations”, which he said were “an essential part of the authorities’ commitment to financial reform”.

The Conservative MP for Chichester said regulators should not give in to any special pleading from banks over the reforms, which were introduced in the aftermath of the financial crisis.

“The regulators asked for more powers. They got them. Parliament’s job now is to ensure that the regulators don’t inadvertently allow the reforms to be called off before they have been implemented,” he said.

Much more work is needed to be done, and regulators must have confidence they can let a major bank go bust, without serious contagion risk, and that they could break it up, while maintaining continuity of its retail, ring-fenced operations, Mr Tyrie claimed.

He added: “They may try to get around the rules once they are in place. This serves to emphasise the need for electrification of the ring-fence.”

In July this year, Sir John Vickers, former chairman of the Independent Commission on Banking, told a House of Lords economic affairs committee that banking reform, including the ring-fencing currently being implemented by the PRA, was needed now more than ever.

He said: “The case for these measures is every bit as strong today as it was when we made our report four years ago, if anything it is stronger.”

Sir John, currently warden of All Souls College, Oxford, said some risk to the taxpayer remained, largely because some banks were still “too big to fail”.

Adviser view

London-based chartered financial planner Filip Slipaczek said: “It is often forgotten that the crash of 2008 was caused by the reckless greed of many of the high street banks, and lack of supervision by the regulator, and they were bailed out with taxpayers’ money. Mr Tyrie is absolutely correct in his comments.

“Sadly if I or fellow chartered financial planners give bad or reckless advice we are not subsidised by the public purse. It is a pity that what is good for the goose does not apply to the gander.”