The line from Downing St this morning was very clear: the Barclays/Libor scandal and others were less likely to be repeated under the government’s new regulatory regime. The prime minister’s spokeswoman said:
The government is taking measures over regulation because soft-touch regulation under the previous government hasn’t worked. Hence we have seen this sort of thing happen. This activity happened at a time when there was soft-touch regulation in place.
George Osborne is in the Commons right now extolling the virtues of the coalition’s reform of the regulatory regime and replacement of the FSA, the City watchdog which is currently being dismantled: “How were such failures allowed to continue unchecked?” he asked MPs of the old regulatory system.
He even asked pointedly whether there were any “gaps in the criminal regime left by the last government” which needed to be cleared up.
It was wrong that there were no criminal sanctions in this country for the manipulation of Libor – and that would now be reviewed, he said. Mr Osborne said he wanted any fines paid by banks over this to go to the government rather than the FSA. This could be retrospective, he suggested.
Among rumblings from Labour MPs, the chancellor urged the opposition to “apologise” for the mess his government is currently clearing up.
All of this presupposes, of course, that the manipulation was due to regulatory failure rather than wrongdoing by individual bankers within individual banks. And that by moving around the regulatory furniture everyone will in future behave. Many would disagree with that analysis. Not least because the Tories, a decade ago, constantly complained that Labour was over-regulating the financial sector.
But Osborne made the point repeatedly, arguing that Lord Myners – former Labour City minister – had claimed it was “nothing to do with us” on Newsnight last night.
“Those responsibility in government at the time have got to apologise and accept fully their own wrong before they are going to be heard and listened to…at the moment they don’t seem willing to do that,” said the Chancellor.
Meanwhile Ed Miliband, the Labour leader, has used a speech at the Unite conference to call for criminal prosecutions where necessary. (This is being examined in the USA at the moment, as my colleagues revealed.) From Osborne’s comments, however, it appears that this is unlikely to happen in the UK under existing law.
Incidentally, I’m yet to see a full analysis of the impact of the manipulation (downwards) of Libor on the public because of this (in the words of Rachel Reeves) “price-fixing scandal“. Presumably by pushing Libor downwards, traders made mortgages cheaper but also pushed down the interest rate on savings products.
Alistair Darling is now speaking with a typically intelligent observation: should the setting of Libor now be removed from the hands of banks and put into independent hands, he asks.