1 Introduction
1. The Parliamentary Commission on Banking Standards
was established to examine the crisis of culture and standards
in banking which has been exposed in recent times. The Commission
was also asked to examine the Government's draft legislative proposals
to bring about structural change in the UK banking sector to secure
a greater degree of organisational separation between retail banking
and investment banking. We discharged this last requirement in
our First Report published on 21 December,[1]
and in our more recent follow-up Report on the same subject.[2]
We intend to report fully on the issues of culture and standards
in our final Report later this Spring.
2. In the course of our consideration of the
Government's structural proposals, we received evidence, most
forcefully from Paul Volcker, the former Chairman of the US Federal
Reserve, about the risks that could be posed to attempts to improve
the culture and standards of banks through banks being able to
undertake "proprietary trading"—a term whose meaning
is explored in the next chapter. We noted in our First Report
that there was:
evidence to suggest that proprietary trading, which
under the current proposals could still take place within the
non-ring-fenced part of banking groups, is an activity which is
incompatible with maintaining the required integrity of customer-facing
banking and which could have harmful cultural effects if permitted
to continue.[3]
We indicated our intention to take further evidence
in the New Year on this matter.[4]
3. In preparing this Report, we have benefited
from written evidence from major UK banks, from the Financial
Services Authority (FSA) and from Finance Watch, a Europe-wide
pressure group. We have also 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 Independent
Commission on Banking (ICB), from Martin Taylor and Bill Winters,
who were members of the ICB, from individual banks, from Michael
Cohrs of the Financial Policy Committee, from Lord Turner of Ecchinswell,
the Chairman of the FSA, and from the Rt. Hon. George Osborne
MP, the Chancellor of the Exchequer. We are most grateful to all
those who assisted us in the course of work on this matter.
1 Parliamentary Commission on Banking Standards, First
Report of Session 2012-13, First Report, HC 848/ HL 98
(hereafter cited as First Report) Back
2
Parliamentary Commission on Banking Standards, Second Report of
Session 2012-13, Banking reform: towards the right structure,
HC 1012/ HL 126 (hereafter cited as Second Report) Back
3
First Report, para 95 Back
4
Ibid., para 96 Back
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