Bankers to be grilled under oath: Osborne rejects judicial probe in favour of 6-month Parliamentary investigation

Bankers to be grilled under oath: Osborne rejects judicial probe in favour of 6-month Parliamentary investigation

• Committee to report by the end of the year so it can influence new banking legislation proposed for 2013
• Will have power to summon witnesses under oath
• Ed Miliband renews call for longer, independent inquiry
  

By James Chapman and Becky Barrow

PUBLISHED: 10:24 EST, 2 July 2012 | UPDATED: 22:55 EST, 2 July 2012

Bankers will have to give evidence on oath to a six-month Parliamentary inquiry into their behaviour.

David Cameron and George Osborne dismissed calls for a judge-led investigation, like that into the media by Lord Justice Leveson, insisting a panel of senior MPs and peers could act more quickly and forensically.

The committee will aim to report by Christmas so its recommendations can be included in a Banking Reform Bill due early next year.

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Announcement: David Cameron said the probe into Libor fixing would get to the truth quickly rather than a longer Leveson-style inquiry

It will examine the 'culture and professional standards of the financial services industry' and determine whether new criminal and civil sanctions are necessary.

But the Government's move drew scorn from Labour, which is to try to force a Commons vote as early as today on whether a public inquiry should be held instead.

Labour sources said they were considering whether or not to co-operate with the Parliamentary investigation. If Labour refused to allow its MPs and peers to sit on the panel, its cross-party credibility would be fatally undermined.

The Chancellor told MPs: 'The failure to regulate the banks in the boom years cost this country billions of pounds. The behaviour of some in the financial services industry has damaged the reputation of an industry that employs hundreds of thousands of people and is vital to the economic prosperity of the country.

'We are changing the failed regulation, reforming the banks â€" now it's time to deal with the culture that flourished in the age of irresponsibility and hold those who allowed it to flourish to account.

'I don't think a long costly public inquiry is the right answer. It would take months to set up and years to report. We know what went wrong. We can't wait until 2015 or 2016 to fix it.

Anger: Ed Miliband called for a full independent inquiry into banking standards

'Let us have a serious inquiry, but let us have an inquiry that comes to a conclusion within a measurably short period of time, so we can actually amend the law that is going before the House next year.'

The committee, which is expected to start work as early as next week, is to be led by Andrew Tyrie, the chairman of the Commons Treasury Select Committee.

Senior figures from the House of Lords, such as former Chancellor Lord Lawson, are expected to be invited to sit on the panel, as well as a number of cross-bench peers.

Unusually, the committee is expected to question people under oath, including members of both Houses, and powers to summon witnesses or relevant papers.

Witnesses are likely to include Bank of England governor Sir Mervyn King and his deputy Paul Tucker, former prime minister Gordon Brown and Shadow Chancellor Ed Balls, who was a Treasury minister when the scandal was taking place.

A separate, independent review of the regulation of Libor, the inter-bank lending rate at the centre of the scandal, will also take place and will be headed by Martin Wheatley, the chief of the Financial Conduct Authority.

His review will also look at the adequacy of the UK's current civil and criminal sanctioning powers with regards to financial conduct and market abuse.

Mr Miliband said the inquiry did not go far enough and demanded a 'full and open inquiry, independent of bankers and independent of politici ans'.

'However able or distinguished, politicians investigating bankers will not command the consent of the British people,' he told MPs. 'People are understandably angry about the way banks let them down and I don't believe the proposed way forward is a way we can build the consensus that is required for real change.'

Mr Balls said the decision to reject Labour's call for a judge-led public inquiry 'will not do'.

'Just as in phone hacking or the Iraq war, so in banking, only with an independent, forensic and open public inquiry, not politicians investigating bankers, can we re-build trust for the future,' he said.

Banking, he added, was a profession which depended on trust, and that trust was 'currently in tatters'.

In the Lords, former Labour City minister Lord Myners condemned the 'monstrous' activities of those behind the manipulation of interest rates and questioned the role of trade minister Lord Green, who was chairman of the British Bankers' Association when it took place. The Treasury Select Committee has launched its own investigation into the rate fixing scandal, with Barcl ays boss Bob Diamond due to give evidence tomorrow.

Committee sources said Mr Tucker is likely to be summoned as well as two former chancellors, Alistair Darling and Mr Brown.

In another move, Mr Osborne confirmed taxpayers would scoop a windfall worth billions of pounds from fines which are expected to be paid by British banks involved in the manipulation of interest rates.

At present, all fines which are levied by the City regulator, the Financial Services Authority, benefit banks, rather than cash-strapped taxpayers.

The money is paid to the FSA, which uses the cash to lower the annual levy paid by all its regulated members from banks to small building societies. But yesterday the Chancellor said all fines â€" backdated from April this year to include the Barclays fine â€" will be paid into the public purse.

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