I have regular meetings with the Governor to discuss a wide range of issues.
Does the Chancellor agree that his Government’s decision to remove from the Bank of England its banking oversight and regulatory function was incredibly misguided and short-sighted? Does he also agree that that is one of the main reasons why the banking and financial crisis in Britain is worse than in practically any other country—apart, perhaps, from Iceland?
No, I do not agree with the hon. Gentleman. That had nothing to do with the origins of the crisis in the banking sector. The start of the problem was that too many banks, particularly in the United States in the sub-prime market, took on risk that they did not understand. If the hon. Gentleman was right in his analysis, there would not have been a banking crisis in any other country. The fact is that every developed country has experienced this—and as the hon. Gentleman knows, they all have different models in relation to regulation and supervision. The primary responsibility for any organisation must rest with the board of directors of that organisation, and in too many cases they were found wanting. I do not agree with the hon. Gentleman. I think that his analysis of what happened is wrong.
In his discussions with the Bank of England about regulation, has the Chancellor discussed, or will he discuss, the involvement of Lloyds TSB in the practice of “stripping”—laundering money—from Iran via London into the United States which has caused it to be fined more than $300 million as a preliminary fine, which ordinary people in the UK are having to pay as a consequence of their ownership of Lloyds TSB?
No, but I know that my hon. Friend has raised the matter before. I will write to him about it. I had better do that, for the sake of completeness, and I will arrange for a copy of the letter to be placed in the Library.
The Chancellor said as recently as 30 November:
“The structure”—
that is, the regulatory structure—
“that we have with the Bank and the FSA is the right one.”—[Official Report, 30 November 2009; Vol. 501, c. 876.]
Given that we have seen loan-to-value ratios of 125 per cent. and rampant self-certification in domestic mortgage lending going unchecked, warnings about the asset price bubble going unheeded, a banking system that came within hours of collapse, and total taxpayer exposure to that banking system now equivalent to about £40,000 per family, could he tell the House what kind of disaster it would take to persuade him that that structure was not the right one?
The hon. Gentleman is working on the basis that it was the regulatory structure that caused those problems. Equally, I might ask him how he thinks reversing the FSA into the Bank of England, with the same people doing the same job, would automatically have meant that the problem would not have arisen. I have explained to the House on many occasions what the problem was. Principally, it was a failure in relation to those responsible for running the banks—a failure to understand the risks to which they had become exposed. Yes, there were mistakes in the regulatory system and the supervisory system in every major developed country in the world. There is no doubt about that, but I honestly do not think that putting the FSA into the Bank of England would have prevented the problem from arising in the first place. I remind the Conservative party that just a few weeks before the crisis, the one policy that it had come up with was a policy that it was not necessary to regulate mortgages, because the risk lay with the institutions not with the individuals. Look where that policy would have ended up.