Vickers fell ‘hook, line and sinker’ for bank lobby line claims Myners

Lord Myners, the former City minister, yesterday launched a blistering attack on reforms announced on Monday aimed at preventing another banking crisis.

The Labour peer said the Independent Commission on Banking (ICB) had simply failed to address some of the most critical issues confronting the industry.

He accused the ICB, under Sir John Vickers, of swallowing “hook, line and sinker” lines produced by the bank lobby.

Lord Myners, speaking in the House of Lords, also branded the proposed timetable for implementing the reforms by 2019 as “unnecessarily generous” to bankers.

But despite his strong reservations, he said the reforms were “better than doing nothing” and urged ministers to get on with them.

Tory former chancellor Lord Lawson of Blaby swiftly hit back, accusing the last Labour government of introducing the “most disastrous and dysfunctional system of banking regulation imaginable”.

But he too warned that the system of ring fencing lenders’ retail and investment divisions, proposed by the ICB, could prove inadequate.

Yesterday, The Scotsman revealed that one of the City’s top financiers, Jon Moulton, had criticised the government for giving the banks until 2019 to introduce the reforms.

Speaking at an event in Edinburgh, the private equity veteran also argued that the estimated £7 billion-a-year bill was a small price for the banks to pay compared to how much damage had been caused by the credit crunch and subsequent banking crisis.

Opening a debate on the ICB report, Myners said it “simply fails to address some of the most critical issues currently confronting us in terms of establishing a safer and more economically effective banking system.

“The Chancellor [George Osborne] sent the ball into the long grass a year ago when he established the ICB. This particular dog has come back with the wrong ball,” he said.

“In many respects, the ICB has simply swallowed – hook, line and sinker – the lines produced by the bank lobby on the importance of credit and the banks to supporting the economy.”

Myners said of the financial crisis gripping Europe that a “massive recapitalisation” of the European banking system was “absolutely imperative”.

Lawson said the root cause of the problems in the financial sector was “greed and folly” among bankers and he deeply regretted the fact that the last Labour government “tore up” the system of banking supervision introduced by him in the 1980s.

He insisted the proposed reforms, although not perfect, were “rather better” than Myners had indicated.

Lawson said the ICB had said nothing about the role of bank auditors and accused Myners of doing nothing when he called for the separation of bank retail and investment divisions more than two years ago.

“The question is whether the ring fence will be adequate or whether you need complete structural separation. I fear the ring fence will not prove adequate.

“I believe that the importance of complete separation will be seen to be necessary.”

Liberal Democrat Lord Newby praised the Vickers report and said it was necessary because banks had not changed their behaviour, pointing to a reluctance to lend to businesses and the continued payment of large bonuses.