The full scale of big banks' lobbying of the Chancellor, George Osborne, to get him to water down banking reforms can be revealed today. Senior bank executives met or called Treasury ministers nine times in the weeks after Sir John Vickers published his landmark proposals on how to prevent another banking crisis, The Independent can reveal.
Bank bosses are fighting furiously behind the scenes to limit any changes to the way they do business. Fears are growing – articulated by Sir John himself – that the banks are successfully thwarting the Government's plans to overhaul the British banking system and the Treasury is weakening some of the key reforms as a result of intense lobbying.
Mr Osborne also personally met the Barclays boss Bob Diamond, the Royal Bank of Scotland's Stephen Hester and Lloyds' Antonio Horta-Osorio on separate occasions in the days before the Vickers report.
Mr Osborne will announce his official response to the Vickers Independent Commission on Banking proposals on Monday – it is certain to be scrutinised for any sign that the Government's resolve to tackle the sector has been weakened.
The commission recommended that banks should be required to "ring fence" their high street banking operations away from their "casino" investment operations; and to increase their capital buffers in order to reduce the chances of British taxpayers being forced to rescue them in future. (Taxpayers had to pump in £65.9bn to save Lloyds, RBS and HBOS.)
The full list of contacts between bankers and ministers, revealed through a request under the Freedom of Information Act by The Independent, shows that the Chief Secretary to the Treasury Danny Alexander and the Financial Secretary to the Treasury Mark Hoban held meetings with Mr Hester of RBS, Mr Diamond, and Douglas Flint of HSBC in the nine days after the release of the Vickers report in September as they lobbied against the plans. The largest banks have warned that the reforms could harm the economy and threatened to move their headquarters out of Britain.
Mr Hester attended a meeting with Mr Alexander on the very day the report was published. Mr Hoban held his own meeting with Mr Hester two days later. The Financial Secretary also met separately with the chief executives of Lloyds, Barclays and HSBC in the same week. This was followed over the next month with further meetings and phone calls between Mr Hoban and senior bankers. There was also a meeting between the Commercial Secretary to the Treasury, Lord Sassoon – himself a former investment banker for SG Warburg – and Naguib Kheraj, the vice-chairman of Barclays on 4 October.
"Bank bosses seem to have been down their inside track to the Treasury as often as a Murdoch editor into No10 under Andy Coulson and none of them were there to talk about the weather," Lord Oakeshott, the former Liberal Democrat Treasury spokesman, said.
Mr Osborne welcomed the final conclusions of the Banking Commission in September and promised to implement them. But there have been reports that the Treasury is preparing to water down key elements such as the special protection for retail depositors and the new, rigorous capital regime.
Robert Jenkins, a member of the UK's incoming new super regulator, the Financial Policy Committee, said in a speech last month that bank lobbies are "winning battles" over new regulation. He has also warned that the 2019 implementation date for the Vickers reforms would "allow lobbyists to chip away until the proposal becomes both unrecognisable and ineffective".
Sir John told Parliament last month: "One sees evidence of lobbying activity in a variety of jurisdictions on these fronts and I think it's very important both within the UK and in the wider international community that there is strong resistance. It is for Government and Parliament to resist emasculation or watering down."
Mr Diamond told the Treasury Select Committee this week that the Vickers reforms would cost Barclays "north of £1bn" a year. He also told MPs that forcing banks such as Barclays to hold more capital risked stunting economic growth. "I do worry that we lean too far on cutting risk and increasing capital and too little on the impact that has on the real economy," he said.
In quotes: What they said about bank reform
"We need to think deeply about whether we can sustain banks that are not only too big to fail, but potentially too big to bail."
George Osborne, 8 April 2009
"The large banks with their casino banking practices need to be broken up."
Vince Cable, 3 March 2010
"It is an impressive report and an important step towards a new banking system."
George Osborne on the final Vickers report, 12 September 2011
"As long as we legislate during this parliament, I suspect, actually, the changes will be implemented well before 2019."
Nick Clegg, 20 September 2011
"Unless we actually think about the deep structure issues that have led us to where we are, we'd be doomed to go through it again, but on a larger scale."
Mervyn King, Bank of England Governor, January 2010
"I want radical reform. The key is we move to implementation of something that is effective and we do it without delay."
Alistair Darling, January 2010