In June 2010 the Chancellor set up the Banking Commission, with Sir John Vickers as Chair, to solve the ‘too big to fail/too big to save’ conundrum while taking into account the need to maintain economic growth. They were given just over a year to prepare their report.
The complex nature of banking regulation and the difficult issue of how to manage future risk, without crippling the banking sector and thus the economy, meant that neither the Liberal Democrat nor the Conservative ministers believed they had a complete answer. Both were genuinely looking to the commission to clarify the issues and provide options for reform. This echoes the experience with the Pensions Commission. Tony Blair really was looking to the commission for answers to some complicated questions, as well as to help navigate around Treasury roadblocks.
The second consequence was that it made it impossible for the five commissioners to believe that they had the answer to the question before the process began, despite the commissioners being extremely well informed and having strong opinions. They needed to engage in a genuine common learning process. This allowed the commission to come to a unified view on the way forward. This also closely echoes the journey that the Pensions Commission went on, undertaking a serious original research effort and developing their own evidence base, forging a consensus view in the process.
Both commissions needed to blend independence with pragmatism. Successful commissions have to tread a fine line between developing proposals derived as closely as possible from the evidence and being thoroughly grounded in the realm of the possible. The Banking Commission took a keen interest in the regulatory efforts being developed in other jurisdictions in an attempt to ensure that they were reinforcing other reforms rather than cutting across them. The Pensions Commission took care to explain their reasoning in order to secure support amongst key press commentators. They also engineered their proposals to ensure that all of the key stakeholders (employers, employees, and government) were clearly taking some of the strain of the changes. The Banking Commission knew that the banks would lobby hard against proposals – and also had to acknowledge that there were big areas where people could legitimately take different views about the costs and the benefits.
Perhaps the biggest difference between the two processes is the amount of time available to them. The Pensions Commission had an elongated time span imposed on them. But this allowed it to develop and publish an extensive evidence base, narrowing the available area for disagreement and establishing them as the undisputed experts in the field. They then went on to develop detailed and systematic proposals for reform based on their previous work. The Banking Commission published an interim report but only had a year before they had to report back to Chancellor, putting some constraints on the amount of research that could be done.
The Government published its response to the Banking Commissions proposals in December last year, promising to “implement the ICB’s advice in stages with the full package of reforms completed by 2019.” If the government sticks to this promise then the Banking Commission would meet our definition of “policy success”. But whereas in the case of pensions, outcome success is much easier to judge (more enrolment, reductions in poverty in old age), in the case of the Banking Commission they can only hope to reduce risk to an acceptable level, making the success less clear cut.
Read Making Policy Better
The event, Inside the Banking Commission, on 19 January 2012 was sponsored by Aldermore Bank.