As I write this, the top headline on the BBC online news reads Acclaim for Bank Shake-up Plan. The report states that there is broad support for the Vickers’ report’s proposals to separate domestic retail banking and global wholesale and investment banking operations. This support extends to the Chancellor and the Prime Minister.
What the BBC doesn’t point out is that this a complete victory for the Liberal Democrats – particularly Vince Cable. When the banking crisis broke , we quickly decided that we had to ensure that the state couldn’t be put in the position again where it had to bail out the totality of what the major banks did. We accepted that, in order to maintain confidence in the system, the Government would always have to stand behind individual bank account holders, but we could see no reason why we should all have to guarantee the more risky “casino” activities of the big banks.
We agued that a British version of the US Glass-Steagall Act should be introduced to restrict how banks could use depositors funds and to ringfence the Government’s liabilities in the case of a crisis.
At the time we were in a small minority. In the Lords, when I advocated splitting the banks on the lines which Vickers is now suggesting, the Labour front bench responded with withering scorn. Today, in response to a Parliamentary statement on Vickers, they have had the brass neck to say that the Government hasn’t acted with enough urgency to make this change!
Initially, with the exception of a few independent-minded Tory peers, the official Conservative position was, at best lukewarm. And as we’ve seen, as the banks have , in a display of brazen self-interest, sought to argue that the sky would fall in if these reforms were made, there has been considerable nervousness amongst some Conservative cabinet members about which way to jump.
They have now jumped – into the Lib Dem camp.
There has been a lot of sound and fury over recent days about the pace at which the reforms will be introduced. Even here we’ve seen considerable movement, with the Government suggesting today not only that there will be legislation to implement Vickers before the next election, but that some of it could be in the Financial Services Bill, which is currently undergoing pre-legislative scrutiny. Final implementation may run to 2019, to coincide with completion of the introduction of the new Basel capital rules, but the die has already been cast and the banks will now have no option but to start beginning to change their behaviour.
We have a tendency in the party to fail to shout about our achievements in Government and to quibble about what are essentially straightforward Lib Dem wins.
This is a straightforward Lib Dem win. We must make sure that the country realises it.
Dick Newby is Co-Chair Parliamentary Treasury Policy Committee