House of Commons Hansard Debates for 14 Dec 1995 (pt 29)

Mr. Darling: The hon. Lady surely must accept that there is a substantial difference between buying a second-hand car and buying a pension. The whole point of the regulatory regime is to ensure that the buyer and the seller are put on as equal a footing as possible. The way to ensure that is to concentrate on the training, competence and professionalism of those who sell pensions. The hon. Lady's comparison, frankly, will make many members of the public wonder about the Government's attitude. I think that she should clarify what she has said.

Mrs. Knight: The hon. Gentleman's comment is really a bit too much. Individuals must take responsibility for their actions; they must ask questions. It is true that a car is a tangible entity and a financial service is not. There are obvious differences, but that does not mean that individuals can ignore the responsibility that they have themselves to ask questions about the product that they are buying, whether it is a financial service or something else.

The regulatory regime is there to assist the individual and ensure that there is training and competence for the salesman. I do not think that it is right and proper to say that an individual does not have to take any responsibility for his action in the sphere of financial services. He must have the same responsibility as in other spheres.

Mr. Carrington: I agree entirely with my hon. Friend. Information must be provided so that one financial product can be compared to another by an individual who does not have specialist knowledge or training. We are talking about regulation to ensure that the industry provides products that are easily comparable by someone who is not a specialist.

Mrs. Knight: My hon. Friend is correct, and that is what disclosure is all about. Disclosure provides individuals with knowledge about what they are buying, which was not previously the case. I say again that each individual has a responsibility to ask questions and think about what he is buying. The Government also have the responsibility to

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ensure that there is a working regulatory framework and the other features that have been mentioned by hon. Members. I thank my hon. Friend for his comments and hope that he agrees with what I have said.

I also hope that when the hon. Member for Edinburgh, Central (Mr. Darling) leaves the Chamber, he will think through some of the points that have been made because I think that his comment went a little bit far--perhaps it was on purpose. We are talking about people, companies, independent financial advisers and people's futures.

My hon. Friend the Member for Carshalton and Wallington made the point that capital is footloose and that countries are in competition around the world in financial services, as they are in other spheres. He asked what was being done to ensure that this country takes due cognisance of that fact in its regulatory process. I assure him that we are promoting the competitiveness of the financial services industry in the United Kingdom. We are ensuring that it is in a fit state to respond to the ever-increasing pace of developments in products and techniques, and we are keeping a careful watch on the burdens that our own regulatory system may impose so that the right balance is struck between encouraging innovation and maintaining proper protection for the investor.

I take issue with the point that the hon. Member for Edinburgh, Central made about whether the Government were doing enough to fight Britain's corner in Europe. I can assure him that we are, and in a robust manner. We are arguing in the European Union for an approach to financial regulation that enhances Europe's strengths vis-o-vis the rest of the world, and for an approach that does not tie down too tightly the United Kingdom, which has specialities in this field that other European countries lack. I hope that the hon. Member for Edinburgh, Central will remember that when he takes up this matter again.

We are also fighting to obtain maximum access for our firms in overseas markets, either as part of multilateral negotiations or through bilateral efforts--and by looking at some products. It is quite correct that competition has come from Luxembourg, to name but one country; part of our response to such competition comes in the form of new products, of which open-ended investment companies are an example.

Barings has been mentioned several times in the debate. My hon. Friend the Member for Hazel Grove highlighted the differences, as he saw them, between the Board of Banking Supervision report and the report of the Singapore authorities. I assure him that the two reports come to the same general conclusion, however. The Singapore report may come to firmer conclusions about the motives of certain senior managers, but it is important to remember that the BOBS report did not have access to much of the evidence in Singapore. Both reports have been extremely useful.

Much has been said today and for several months about the Barings collapse. The episode carried serious messages for management in every financial institution around the world. Even those--there were many--who said that it could not possibly happen to them put investigations in hand just to be on the safe side. If there is a silver lining to the whole affair, it is that the entire international financial system is likely to be somewhat more secure as a result.

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There are important messages for regulators and supervisors as well. The Governor of the Bank of England has welcomed the 17 recommendations for the Bank in the Board of Banking Supervision's report. The Bank will respond to the board by the end of the year on its implementation of the recommendations, and the Governor expects to send a copy to the Treasury and Civil Service Select Committee once it has been presented to the board.

Arthur Andersen has been appointed to review the way in which the Bank approaches supervision. The report should be completed by next April. The Treasury and Civil Service Select Committee has asked the Treasury to conduct its own review of the role of the Bank as prudential supervisor of banks. With the Arthur Andersen review under way, however, and with the report by the SFA due shortly, together with the Select Committee's decision to undertake its own inquiry into Barings, it makes more sense for the Government to await those findings before deciding whether yet another report is required. A further report before the first report has been completed strikes me as slightly silly; waiting for those reports seems rather more sensible.

The clear message to those who regulate as well as to those who manage financial institutions is that in a fast-moving and changing market the need to be up to date with precisely what is happening and its possible consequences is paramount.