The UK government needs to address the concerns that the parliamentary committee which oversees the banking industry still has over its proposed regulatory reforms, a senior Conservative politician has told CNBC.com
Treasury Select Committee chairman Andrew Tyrie said that future reforms need to place competition at the heart of the role of the UK’s new financial regulator.
The reforms published in a white paper by the Treasury include disbanding the current City regulator, the Financial Services Authority, (FSA) and replacing it with a “Twin Peaks” model of regulation which will split responsibility for regulating banking practices and other financial services companies between two new agencies.
Tyrie said the Treasury Select Committee had identified several areas within the draft legislation that would require amendments, and that he would not be surprised to see numerous changes made before the proposals were put to the House of Commons to be debated.
Tyrie said it was also clear from the remarks the governor of the Bank of England, Sir Mervyn King, made to the committee on Tuesday that he believed the government had got a number of its reforms wrong and that there were “issues that needed to be addressed”.
“The legislation is out for consultation and there is a joint committee that is going to look at it, the select committee is going to look at it, others will examine it, so it would be very surprising if there were not changes,” Tyrie said.
“I would think there are almost certainly things that can be improved on. The Treasury Committee has already identified a few, one important one being making sure competition is right at the heart of the role of the new regulator on the conduct of business side.”
He also stressed the importance for the UK to play a leading role in shaping financial services regulation across Europe, but only after the government had addressed its problems at home.
“The important thing is that we get our regulation right. Equally important though, is once we’ve identified how to do that we need to sell the type of regulation that we think is best in everyone’s interest to our continental partners. And perhaps we don’t devote the kind of resources we need to that kind of lobbying and pressuring that other countries do at governmental level.”
Tyrie was speaking at the British Banker’s Association (BBA) annual conference on Wednesday. During his speech to the conference, he told delegates that the banking industry had been guilty of letting itself be attacked by the public and other commentators and that bankers had also indulged in, and contributed to, their own “banker bashing”.
He urged the City to engage publicly in the debate over the issue of ring fencing retail and investment banking operations in the UK, as recommended by the interim report by the Independent Commission on Banking, otherwise known as the Vicker’s Commission, arguing that for the banks not to do so would be a mistake.
However he also dismissed the notion that the UK should rebalance its economy and reduce the size of its banking sector as absurd.
“Financial services are one of the great success stories of the UK. It would be utterly absurd if the UK were to set off of on an arbitrary rebalancing of the economy in favour of another sector of the economy,” he said.
Later in a question and answer session he admitted he had had concerns at the level of pre-briefing coming out of the Chancellor of the Exchequer’s department, the Treasury, ahead of big announcements or speeches including the chancellor’s recent speech to the City at the Mansion House and ahead of the Budget in March, suggesting it was not helpful for the good governance of the UK financial services industry