George Osborne speaks the language of the banking lobby

Ben Chu

osborne 150x150 George Osborne speaks the language of the banking lobbyGeorge Osborne suggested to the Banking Standards Commission on Wednesday that reforming banking would undermine bank lending:

“There is a cost to the industry, and exactly the same Members of Parliament who get up and say, ‘You must screw the banks down’ are the same people getting up and saying, ‘We’ve got to get the banks to lend and when are we going to do it?’ I have to have a regard for the cost on the industry of the regulation that I propose to Parliament.”

Andy Haldane, the Bank of England’s director of financial stability, told the committee the following day that this was scaremongering:

“I’d be resistant to the notion that the mere having of this sanction power would cause banks to look inwards, to hoard capital and not lend. I think we’ve heard the argument far too much over the last few years and we must not be held hostage in doing the right thing by the notion that the banks will stop lending.”

The Chancellor was careful to include the banking ”industry” in his cherished consensus on structual banking reform.

“I would argue that my job as the Chancellor has been to present to Parliament a Bill that commands broad consensus among our financial regulating community, our Government and, more broadly, industry and society.”

“I can give an assurance to Parliament that the principal secondary legislation…will be available before the Committee stage of the Bill. We will find ways to involve the industry

Not all banking lobbying was bad, insisted the Chancellor:

“Sometimes they lobby with good reason. It is an important industry that employs an awful lot of people and you cannot just ignore their requests, but you also need to have the self-confidence as a state to turn down those requests. The way we have changed the regulatory system gives us a regulator that will have that self-confidence.”

There were a number of banking-friendly tropes in Osborne’s evidence:

“I want Britain to be the home of big, successful banks. It would be a real shame to say to the likes of HSBC that they cannot locate themselves in the UK. I think that would be a mistake for us as a country. That is my personal view, and the view of the Government.”

“We have to try to keep our industry competitive with the rest of the world.”

“Britain has the world’s largest and most international financial centre, and I do not think we want to shut that all down, have that move off somewhere else and have our economy affected by what happens elsewhere.”

Consider all that. And then call to mind the fears expressed to the Banking Standards Commission by regulators from the Financial Services Authority and the Bank of England about the power and persistence of the banking lobby. Remember the large number of meetings between the Treasury and banks around the publication of the Vickers report in 2011. Bear in mind that the Vickers recommendations were watered down when they were turned into draft legislation in June.

And then answer the question: How confident do you feel that the Chancellor’s proposed ring-fencing of retail banks will prove robust and protect the public from the need to pick up the future gambling debts of investment bankers?

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