I welcome this important and authoritative interim report from Sir John Vickers and his team.
Families and businesses in Britain have paid a very heavy price for the irresponsible actions of banks around the world, which caused the global financial crisis and plunged the whole world into recession. We need radical changes to ensure this can never happen again.
As I said at the weekend there are three tests for banking reform George Osborne must pass: the protection of consumers and taxpayers, international agreement to protect jobs here in Britain and a banking system that works to support the long-term investment needs of businesses and our economy.
As the commission itself says international agreement is vital, but so far George Osborne has failed to show the leadership we need on the world stage. To protect customers and taxpayers we need tough accountability and transparency and clear, workable and robust firewalls. The devil will be in the detail of the commission’s final proposals, but we must get this right.
BBC News Channel interview
Jane Hill: An interim report from the Independent Commission on Banking, are the proposals the recommendations enough to prevent the really grim crisis that we’ve all talked so much about over the last couple of years?
Ed Balls: I’ve not read the report yet, I have spoken to the commissioners this morning and there is a lot of detail to study here. It is an interim report, but I think it is a very tough report and I think you are seeing today that in the banking industry there are some concerns. But I think most people would say rightly so because there were some really irresponsible actions, we need to sort this out. The way that the commission was going about it is ring-fencing the retail banking side, strengthening capital controls there, that sounds to me to be the right approach, there is no need to break up institutions but there has got to be clear separation. The question is though, will it work? And that partly depends upon getting the international agreement that the commission is calling for in the report. I think that lays down the gauntlet to the Chancellor George Osborne because, to be honest, in the last year, on pay, on transparency, on corporate governance internationally, the UK voice has not been strong. And then the other question people will say is will this actually deliver the investment, the jobs in our economy, banks don’t exist for banks sake, they exist to make sure that our economy works well. That is a challenge which the report itself doesn’t really address. That is something for the government and it is something we will be pressing them on in the coming months.
JH: And isn’t it also going to make things more expensive for customers?
EB: Well I think most people would say it would have been very unfair if the brunt of the costs went onto consumers rather than onto the banks themselves. That is partly why the commission is right to say we want more competition, more ways to make sure that the consumer voice is strong. It is also why, though, those other things around pay, around transparency, around accountability, the international agenda is very important because if we carry on with this multi-million bonus culture while consumers are paying the higher charges that will be very unfair. So that is really about the detail of the report, but also, look, ot is an independent commission, the question is will the government implement this properly and that is really the question we will now see in the coming months.
JH: I mean you talk about George Osborne not shouting loud enough for Britain, if I can put it that way, and yet I wonder what goes through your mind as you listen to Sir John Vickers outlining these proposals in terms of the level of responsibility that you take for all of this, you and the previous government?
EB: Well I said yesterday on The Politics Show that I take my responsibility, I was in government and in Britain – our government, our central bank, our regulator, like in America, in Germany all round the world – we didn’t get this right. That doesn’t excuse irresponsible behaviour by banks but we didn’t get it right. I think most people would say though that the actions we took to stop this becoming a global financial meltdown were right. The question now is, can we sort this out for the future and part of the problem is that when we were in government regulating the banks – I admit not in a tough enough way – our Chancellor George Osborne was challenging me all the time saying you are being too tough, you are being too European, you are not having the jobs in Britain because we are regulating them away. You don’t hear that very much from George Osborne anymore and I think quite rightly. The question now is can we get these regulations right. But Britain does not exist as an island. I am in Scotland today, there are thousands of Scottish jobs which depend upon financial services as in London and Leeds across the country. If we only have a UK solution and we end up losing those jobs, that will be to cut off our nose to spite our face. That is not sensible either. So we have got to have a strong international lead from George Osborne, the commission lays down that challenge, will the government respond? To do that they’ve got to be more comfortable in international meetings than they are at the moment, they’ve got to believe that government is part of the solution rather than just part of the problem and that is what we will see in the coming months.