Treasury select committee chair Andrew Tyrie has warned regulators to stand firm in the face of a lobbying drive by banks to water down regulation.
The Financial Times reports a speech made by Tyrie in the City of London last night where the MP argued that banks should not be able to circumvent new ringfencing rules that require them to separate their retail and investment banking arms.
Tyrie said: “Regulators should not give in to special pleading from banks in implementing the reforms introduced as a result of the financial crisis.
“In the Banking Reform Act, ‘electrification’ provides reserve powers for the regulator to require full separation of a particular bank if necessary. This puts in statute a strong disincentive for banks to test the limits of the ringfence.”
He argued given UK regulators imposed £1.4bn in fines last year, there were still clearly conduct issues to be dealt with in the banks.
He said: “The plain fact is banks have not had a grip on regulatory and conduct risk for a long time.”
He added: “Time will tell whether the governance problems are soluble. But it would be absurd — on governance grounds — to call off the ringfencing project before it has even started.
“The regulators asked for more powers. They got them. Parliament’s job now is to ensure the regulators don’t inadvertently allow the reforms to be called off before they have been implemented.”