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| MPs to test rules aimed at insuring against UK bank bailouts MPs to test rules aimed at insuring against UK bank bailouts | |
| (about 7 hours later) | |
| The banking sector is to face fresh scrutiny from MPs, who are embarking on a new inquiry to examine rules put in place after the financial crisis in 2008 to prevent further billion-pound taxpayer bailouts. | The banking sector is to face fresh scrutiny from MPs, who are embarking on a new inquiry to examine rules put in place after the financial crisis in 2008 to prevent further billion-pound taxpayer bailouts. |
| Andrew Tyrie, the Conservative MP who chairs the Treasury select committee, said the public had a right to know if they were protected from a repeat of the financial crisis, when £65bn was pumped into Royal Bank of Scotland and Lloyds Banking Group. | Andrew Tyrie, the Conservative MP who chairs the Treasury select committee, said the public had a right to know if they were protected from a repeat of the financial crisis, when £65bn was pumped into Royal Bank of Scotland and Lloyds Banking Group. |
| “The public was forced to foot the bill – and a large one – when the banks got into trouble during the crisis. They are still footing the bill now, with the profitable disposal of RBS looking like an ever more distant prospect,” said Tyrie. | “The public was forced to foot the bill – and a large one – when the banks got into trouble during the crisis. They are still footing the bill now, with the profitable disposal of RBS looking like an ever more distant prospect,” said Tyrie. |
| Last month, RBS failed the Bank of England’s stress test – an annual health check of the sector introduced after the crisis – in a move exacerbating the problems facing Philip Hammond in reducing the taxpayer stake below 73%. The chancellor said in October that a sale of any more shares in RBS was not practical after his predecessor George Osborne sold off a 5% stake at a £1bn loss in August 2015. | Last month, RBS failed the Bank of England’s stress test – an annual health check of the sector introduced after the crisis – in a move exacerbating the problems facing Philip Hammond in reducing the taxpayer stake below 73%. The chancellor said in October that a sale of any more shares in RBS was not practical after his predecessor George Osborne sold off a 5% stake at a £1bn loss in August 2015. |
| As he launched a call for evidence by 5 March, Tyrie said: “Eight years on from the crisis, a great deal of effort has gone into ending ‘too big to fail’.” | As he launched a call for evidence by 5 March, Tyrie said: “Eight years on from the crisis, a great deal of effort has gone into ending ‘too big to fail’.” |
| Among regulator efforts to make banks safer were new rules to force them to hold more capital, to outline how they could be broken up in the event of collapse, and the ringfencing requirement devised by Sir John Vickers to protect high street operations from investment banking businesses. | Among regulator efforts to make banks safer were new rules to force them to hold more capital, to outline how they could be broken up in the event of collapse, and the ringfencing requirement devised by Sir John Vickers to protect high street operations from investment banking businesses. |
| The financial crisis showed that banks were not holding enough capital to cushion them against the risks they were running. When they needed more funds, it was taxpayers, not investors, who footed the bill. | The financial crisis showed that banks were not holding enough capital to cushion them against the risks they were running. When they needed more funds, it was taxpayers, not investors, who footed the bill. |
| “The public have a right to know whether they are now adequately protected,” said Tyrie. “Ringfencing and resolution regimes are intended to ensure that the failure of large banks can be managed in an orderly way, without relying on public support. It is vital to establish how robust they are.” | “The public have a right to know whether they are now adequately protected,” said Tyrie. “Ringfencing and resolution regimes are intended to ensure that the failure of large banks can be managed in an orderly way, without relying on public support. It is vital to establish how robust they are.” |
| Tyrie also chaired the parliamentary commission on banking standards, which was instigated after the Libor-rigging scandal and looked at the way taxpayers stepped into rescue ailing banks. “As the parliamentary commission on banking standards concluded, the assumption that failing banks would receive public support was part of a toxic cocktail of misaligned incentives which contributed to the financial crisis,” he said. | Tyrie also chaired the parliamentary commission on banking standards, which was instigated after the Libor-rigging scandal and looked at the way taxpayers stepped into rescue ailing banks. “As the parliamentary commission on banking standards concluded, the assumption that failing banks would receive public support was part of a toxic cocktail of misaligned incentives which contributed to the financial crisis,” he said. |
| The EU has also implemented rules that require bondholders to take losses in collapsing banks before taxpayers can pump in funds. | The EU has also implemented rules that require bondholders to take losses in collapsing banks before taxpayers can pump in funds. |
| Among the questions posed by the Treasury select committee in its terms of reference, is the impact of Brexit, if any, on the UK’s regime for handling troubled banks and how far advanced are UK banks in meeting current rules. The Vickers rules, for instance, need to be implemented by the start of 2019. | Among the questions posed by the Treasury select committee in its terms of reference, is the impact of Brexit, if any, on the UK’s regime for handling troubled banks and how far advanced are UK banks in meeting current rules. The Vickers rules, for instance, need to be implemented by the start of 2019. |
| The British Bankers’ Association backed the latest inquiry. “The UK taxpayer should never again have to foot the bill when a financial institution finds itself in difficulty. The BBA therefore welcomes the Treasury committee’s inquiry into capital and resolution and looks forward to contributing to it,” a spokesperson for the lobby group said. | The British Bankers’ Association backed the latest inquiry. “The UK taxpayer should never again have to foot the bill when a financial institution finds itself in difficulty. The BBA therefore welcomes the Treasury committee’s inquiry into capital and resolution and looks forward to contributing to it,” a spokesperson for the lobby group said. |