1 Introduction
1. Structural reform represents a crucial building
block for establishing a safer and more secure banking system
in the United Kingdom. This Commission, in its First Report, concluded
that partial structural separation of the kind proposed initially
by the Independent Commission on Banking (ICB) and subsequently,
with modifications, by the Government in its October 2012 draft
Financial Services (Banking Reform) Bill could bring significant
benefits for public policy and for banking.[1]
We recommended a number of steps to strengthen the proposed legislation
and to increase its chances of being effective, as well as other
measures to enhance the stability of the banking system as a whole.
2. On Monday 4 February, the Government presented
to the House of Commons the Financial Services (Banking Reform)
Bill.[2] The Government
published alongside the Bill a policy paper on Banking Reform
incorporating its response to our First Report.[3]
The Government's policy was supported by a speech that morning
by the Rt Hon George Osborne MP, Chancellor of the Exchequer,[4]
an answer that afternoon by Greg Clark MP, Financial Secretary
to the Treasury to an urgent question in the House of Commons,[5]
and a speech by the Rt Hon Vince Cable, Secretary of State for
Business, Innovation and Skills on Wednesday 6 February.[6]
3. In our First Report, we considered the policy
context of the Government's reform proposals, assessed the case
for a 'ring-fence' to secure greater protection for the core retail
activities of the banking sector alongside other structural reform
options, described how the Government proposed to give legal effect
to such a ring-fence and proposed additional measures for inclusion
in the Bill. This Report:
a) considers the Government's response to our
First Report in relation to the most significant recommendations
in that Report;
b) provides (in the Annex to this Report) a summary
of each recommendation in our First Report, the Government response
and relevant legislative changes; and
c) provides amendments to facilitate debate in
the House of Commons and House of Lords on legislative recommendations
in our First Report not yet reflected in the Bill.
4. In preparing this Report, we have drawn upon
oral evidence taken as part of our wider continuing work on banking
culture and standards, most notably that from Sir John Vickers,
who chaired the ICB, from Martin Taylor and Bill Winters, who
were members of the ICB, from the British Bankers' Association
(BBA) and from individual banks directly affected by the proposals.
We also commissioned Philip Davies, formerly a Parliamentary Counsel
and now a consultant legislative drafter, to prepare amendments
arising from our legislative recommendations, which are set out
in the Appendix to this Report. We publish these amendments while
recognising that further work will need to be undertaken on how
best to give legislative effect to our recommendations. The Commission
is most grateful to all those who assisted with the work leading
to this Report, including specialist advisers Bill Allen and Professor
Geoffrey Wood.[7]
1 Parliamentary Commission on Banking Standards, First
Report, HC (2012-13) 848 and HL Paper 98 of Session 2012-13 (hereafter
cited as First Report), para 93. The Report was published on 21
December 2012. Back
2
Financial Services (Banking Reform) Bill, [Bill 130(2012-13)]
(hereafter cited as Financial Services (Banking Reform) Bill) Back
3
HM Treasury and Department for Business, Innovation and Skills,
Banking reform: a new structure for stability and growth,
February 2013, Cm 8545 (hereafter cited as Banking reform) Back
4
HM Treasury, Speech on the Reform of Banking by the Chancellor
of the Exchequer, Rt Hon George Osborne MP, 4 February 2013 (hereafter
cited as Chancellor's Banking Reform speech) Back
5
HC Deb, 4 February 2013, cols 23 - 34 Back
6
Department for Business Innovation and Skills,, Speech on Banking
by the Secretary of State for Business, Innovation and Skills,
Rt Hon Vince Cable MP, 6 February 2013 (hereafter cited as Speech
by Secretary of State for Business, Innovation and Skills on 6
February) Back
7
Bill Allen and Professor Geoffrey Wood declared interests, relevant
to the Commission's work, on 29 August 2012. Declarations of interest
are available at http://www.parliament.uk/business/committees/committees-a-z/joint-select/professional-standards-in-the-banking-industry/formal-minutes/
The Commission has also appointed other Specialist Advisers in
relation to other aspects of its work. Back
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