By Matthew Barrett
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At the end of David Cameron's European statement, the Prime Minister made a short statement on an inquiry into banking following the Barclays/Libor scandal:
"We need to take action right across the board. Introducing the toughest and most transparent rules on pay and bonuses of any major financial centre in the world. Increasing the taxes banks must pay. Ensuring tough civil and criminal penalties for those who break the law. And above all, clearing up the regulatory failure left by the last government. The British people want to see two things. That bankers who act improperly are punished. And that we learn the broader lessons of what happened in this particular scandal."
Mr Cameron then announced his plan for a parliamentary – rather than judge-led/independent, etc – inquiry into banking:
"[T]he Serious Fraud Office are looking at whether there are any criminal prosecutions that can be brought, and they are using the full force of the law in dealing with this. … I want us to establish a full parliamentary committee of Inquiry involving both Houses chaired by the Chairman of the House of Commons Treasury Select Committee [Andrew Tyrie]. This Inquiry will take evidence under oath have full access to papers, officials and Ministers – including Ministers and Special advisers from the last government and it will be given, by the government, all the resources it needs to do its job properly."
This was the correct approach, the Prime Minister said, because the inquiry would be able to start (and end) quickly, and would be accountable to the Commons.
Following Mr Cameron's statement, George Osborne took to the floor of the House. Mr Osborne first attacked Labour for setting up the current regulatory system:
"[E]very avenue of possible criminal investigations for individuals involved in attempted manipulation of LIBOR is being explored. However, in the view of its Chairman, Lord Turner, the powers that were given to the Authority do not allow it to pursue criminal sanctions. People in the country ask why they didn’t have the necessary powers. Those who set up the tripartite system must answer from that."
Mr Osborne then announced a separate inquiry into banking – to investigate what reforms should be made to the current regulatory system:
"I have today asked Martin Wheatley, the Chief Executive designate of the Financial Conduct Authority to review what reforms are required to the current framework for setting and governing LIBOR. This will include looking at whether participation in the setting of LIBOR should become a regulated activity; the feasibility of using of actual trade data to set the benchmark; and the transparency of the processes surrounding the setting and governance of LIBOR. The review will also look at the adequacy of the UK’s current civil and criminal sanctioning powers with respect to financial misconduct, and market abuse with regards to LIBOR."
Mr Osborne set out his opposition to a Leveson Inquiry-style investigation, saying "I don’t think a long costly public inquiry is the right answer. It would take months to set up and years to report. We know what went wrong. We can’t wait until 2015 or 2016 to fix it."
Mr Osborne said that the parliamentary inquiry would be able to include its recommendations in the current Banking Reform Bill, which Mr Osborne said the Government would bring forward. The Bill would "bring far reaching lasting change to the structure of British banks, ring-fencing retail banks from their investment banking arms", Mr Osborne said. "Let’s see if we can use this Banking Bill to make any further changes needed to the standards of the banking industry, and the criminal and civil powers needed to regulate it and hold people to account for their behaviour."
Mr Osborne gave more details of the proposed parliamentary inquiry:
- It will be a Joint Committee of ten members, drawn from the Commons and the Lords.
- It will be chaired by the Chair of the Treasury Select Committee, Andrew Tyrie.
- The Committee should be able to call witnesses under oath, including current MPs and Lords.
- The Committee will be provided with the resources it needs to do the job.
- It should report back to the House by the end of 2012.
Mr Osborne said the Terms of Reference for the Committee should be:
"building on the Treasury Select Committee’s work and drawing on the conclusions of UK and international regulatory and competition investigations into the LIBOR rate-setting process, consider what lessons are to be learnt from them in relation to transparency, conflicts of interest, culture and the professional standards of the banking industry."
"That", Mr Osborne said, "is enough time to do the job – and do it well – but not so long that this issue drags on for years."