Parliamentary Commission on Banking Standards chair Andrew Tyrie has warned chancellor George Osborne not to look for “back door” funding from the financial services industry.
Giving evidence to the commission today, Osborne faced questions about plans in the draft banking reform bill to charge the industry for the expenses incurred from international financial stability bodies.
The new power would allow the Treasury to force the regulator to charge the industry for Treasury costs. In the wake of the Libor rigging scandal, Osborne also decided that the Treasury will take the money from industry fines rather than allowing it to continue to reduce regulatory costs for other firms.
Defending the move, Osborne said: “We see an expanding role for institutions like the Financial Stability Board, we think they should do more and the UK will have to pay subscriptions to that and the question is where does the money come from.
“It could come from general taxation and the Treasury budget but since other regulators in the UK levied for the cost of some of their international activity, we think it’s perfectly reasonable to put the Treasury’s subscriptions to some of these organisations to be paid for by the industry.
“It is also a matter of practicality. In an age of very tight Government resources the alternative is us squeezing other areas of activity and I don’t think that is sensible.”
But Tyrie argued that every other department has to find money and it is unclear whether the money will be used to fund the Treasury.
He said: “We do not want to find ourselves, and I am sure you would not want to find yourself, supporting the Treasury finding a back door way to support its own revenue stream.”
Speaking alongside Osborne, Treasury director of financial stability John Kingman said there are restrictions around the rules so they can only be used to fund international bodies and not other Treasury activity.