Commission to tear apart banking ‘greed culture’

Britain’s banking foundation has been shaken since the takeover of HBOS in 2008 and more recent scandals including money laundering at HSBC, Barclays’ Libor rate-rigging and daily headlines involving a rogue UBS trader accused of gambling away £1.4bn in the biggest-ever City fraud.

Today, the UK government hopes to change that culture of greed when the Parliamentary Commission on Banking Standards begins its review of a flailing financial services sector that has cost taxpayers £1.5bn a year to bail out – on top of hundreds of billions of pounds of state funds.

The panel, the Parliamentary Commission on Banking Standards, will spend the next three months examining the standards of the banking sector, regulatory and competition investigations into the LIBOR rate-rigging, corporate governance, transparency and conflicts of interest. But the financial services sector also pay the most tax to the UK government – more than £50bn a year according to some estimates – so reforming the beast will require political strength and patience. The committee hopes to make recommendation to the government in early 2013.

So far, written evidence has been submitted by 47 top banks and other parties with a stake in the outcome. An early indication of the panel’s thinking will come on 17 October when the 10 members hear testimony from Federal Reserve Chairman Paul Volcker, who advocates tighter rules for banks’ capital, leverage and liquidity as part of a banking overhaul. The MPs and Lords who will be firing questions include:

Andrew Tyrie, chairman: Mr Tyrie, 55, (photo, right) is the quietly assertive senior economist who will chair the Parliamentary Commission on Banking Standards. The Oxford and Cambridge-educated Chichester Conservative – the first in his family to attend university – is a former adviser to Prime Minister John Major and then-chancellor Nigel Lawson.

Essex-born Tyrie currently chairs of the Treasury select committee whose personal goal appears to be bringing the Bank of England under control. He has threatened to step down if the committee does not command cross-party support. Mr Tyrie did not respond to an interview request from Channel 4 News online.

Notable quote – “The commission will not be able to address all of these deep-rooted problems in a few months. But we can at least signal some remedies, suggesting ways to protect taxpayers better from the consequences of bank failure and to improve the experience of dealing with banks for customers.”

Rt Hon Lord Nigel Lawson of Blaby: The Conservative former chancellor of the exchequer under Margaret Thatcher oversaw the liberalising of Britain’s financial sector in the 1980s. He is an advocate of splitting banks’ retail and investment arms.

Earlier this year, Lord Lawson said he would have preferred the government go further than its current plans to set up a firewall around retail operations within banks and bring about a complete separation.

Notable quote –“Unfortunately, when Gordon Brown came in, he also abolished effectively the board of banking supervision, abolished all the strengthening of the supervisory system that I had put in place in the 1987 Banking Act and that is a part of the story why we got in the mess.”

Lord John McFall of Alcluith: The Labour Co-operative peer, a former chairman of the House of Commons Treasury committee, is also an advocate of dividing up banks.

He chaired the UK Treasury select committee through the financial crisis and was referred to in numerous press reports as the “scourge” of the banking industry. He was open to the idea of breaking up the big UK banks and was highly critical of high pay in the City. He has condemned bonus schemes for encouraging excessive risk-taking at the expense of shareholders’ interests.

Notable quote –““I suggest that the Treasury Committee or other committees of the House should invite (JPMorgan chairman) Jamie Dimon to explore the concept of risk and ask this question: are the largest banks still too big and complex to be managed safely? Are we now seeing “too big to fail” being followed by “too big to behave” in companies such as this one? The way forward lies in good corporate governance to tackle these deep-seated problems.”

The Lord Bishop of Durham Justin Welby: The lord bishop, unaffiliated with any political party, is a Cambridge-educated old Etonian, and the son of a businessman and one-time bootlegger in prohibition America. He was a former oil derivatives trader before a career change, and now frequently writes on banking ethics.

Notable quote: “Focusing on profit alone is an ethic of greed. Banks need to think through their ethics very carefully and many have done so.” And “The strongest influence in any bank is usually its culture and its habit of working. Obviously we have regulations and they are important but what finally tips things in an institution is the instinctive reaction to go in a certain way.”

Baroness Susan Kramer, Liberal Democrat: A Londoner, born in 1950 and educated at St Paul’s Girls’ School and at St Hilda’s College, Oxford, Baroness Kramer was the president of the Oxford Union in Trinity term 1971. She has an MBA from the University of Illinois, USA, and worked as a Citigroup banker in the early 1990s.

She founded Capital Partners with her husband in 1993, and during her time in the Commons was a member of the Treasury select committee. She was introduced into the House of Lords in 2011 and focuses on finance and business issues, including developing a framework for community banks.

Notable quote: “The whole way we are approaching banking reforms is backward-looking. We are all scarred by 2008 and everything that has happened since, such as PPI mis-selling. Underneath it we are in a dynamic period and I expect banks in 10 years time to be fundamentally different than today. I hope we can reshape the regulator and banking culture so it is fit for purpose after a period of dynamic change and not just to deal with the grievances of the past.”

Lord Andrew Turnbull KCB CVO: Lord Turnbull is a crossbencher and former head of the UK government civil service. He is also a career civil servant having mainly worked for HM Treasury, and was previously an economist for the Zambian government. According to the register of interests, he is also a non-executive director of Prudential plc and chairman, BH Global Ltd (investment company).

Notable quote: Lord Turnbull made headlines in 2007 when he describe former Prime Minister Gordon Brown’s style as “Stalinist ruthlessness” with a “cynical view of mankind” and a pension for treating colleagues with contempt.

Mark Garnier, MP: The Conservative MP is a former investment banker and Treasury select committee member who serves on a number of all-party parliamentary groups including economics, money and banking. Mr Garnier was among the panel who cross-examineed Barclays’ former chief executive Bob Diamond about his personal knowledge of the Libor-rigging scandal.

Notable quote: “I think we may be heading towards something like Leveson,” and “I think Bob Diamond has some incredibly important questions to answer, not least because he was the head of Barclays Capital while this was going on, but also he is a derivatives expert – so he should know what is going on.”

Andy Love, MP: Labour/Co-operative MP Love served as a ministerial aide under Jacqui Smith and John Healey. He has been a member of the Treasury committee since 2005. Before his 1997 election as MP for Edmonton, Love was a councillor in Haringey where he was chairman of the finance committee.

Notable quote: In relation to £8.75m payoff to Barclays Jerry del Missier, the most senior executive to authorise the false submission of Libor interest rates, “In the light of the circumstances in which Mr del Missier left Barclays it is totally inappropriate that he should be rewarded with a substantial payoff.”

Rt Hon Pat McFadden: A Labour MP and former business secretary has been a member of the Treasury select committee since 2011. He also worked as a researcher for Donald Dewar, a speechwriter for John Smith and an adviser to Tony Blair.

Notable quote on Standard Charter settling New York probe – “It is not really good enough – even though these are large, complex organisations – for chief executives and chairman to come along to committees and say “Well, I’m sorry there was wrongdoing ion my organisation but I didn’t know about it.’ I think that defence has worn a little bit thin with politicians and regulators.”

John Thurso, MP for Caithness, Sutherland and Easter Ross: Co-chair of the Liberal Democrat parliamentary policy committee on Scotland and member of the Treasury select committee. He is a former shadow secretary of state for business, enterprise and regulatory reform. The first former hereditary peer to become an MP, Thurso sits on the Treasury select committee and chairs the finance and services committee. He also served as Lib Dem business, enterprise and regulatory reform spokesman.

Notable quote – Mr Thurso opts for a more gentle approach than many of his colleagues in parliament, notably referring to Barclays chairman Marcus Agius who resigned after the Libor scandal as a “a man of honour