Formidable: Lord Tyrie was the chief inquisitor of the 2008 crisis
Andrews Tyrie is famous for having been the chief inquisitor during the post-mortem on the last financial crisis. Owlish and managerial, with an inquisitive and piercing eye for detail, he earned a chilling reputation for forensically skewering his victims as the Tory Chairman of the Joint Treasury Committee of MPs.
Now elevated to the House of Lords as an independent peer, the architect of a number of major regulatory reforms in the financial services industry takes a keen interest in the latest banking crisis.
The recent collapses of Credit Suisse and Silicon Valley Bank – and now the wobbles of Deutsche Bank – are “a warning to stay vigilant and not let your guard down,” he says. “The main things we have to guard against are short memories, groupthink and submission to lobbying by vested interests.”
As for the next crisis, he admits to not having a crystal ball. “However, one prediction I will make is that you cannot abolish the business cycle, which is what former Chancellor Gordon Brown suggested when he told us he had ended the boom and bust. “
Tyrie, 66, speaks in the Commons meeting room where he used to hold court – and where hours earlier Boris Johnson gave evidence to another group of MPs about claims that he had misled Parliament over lockdown parties in Downing Street.
Halfway through the former prime minister’s televised testimony, committee members and Johnson had to take a 15-minute break to vote on a new Brexit trade deal for Northern Ireland. Tyrie feels Johnson was saved by the division bell during his long but interrupted grilling because the break gave him a break from relentless questioning.
“If a witness is dodging a question, the only tool available is to point it out intelligently and press from different angles over an extended period of time during cross-examination,” he says.
According to him, “a drop in standards” links the financial crisis of 2008 to the state of political discourse today.
Tyrie also chaired the Parliamentary Committee on Banking Standards in 2012, which recommended a number of reforms in the management of banks intended to prevent another explosion.
The most important of these was the introduction of individual responsibility, particularly in terms of risk management.
“We were engaged in a standard cleaning operation,” he recalls. ‘Now the political community of both major parties is rightly engaged in a process of cleaning up political discourse.
“Trust has been one of the main casualties of the banking crisis, which was caused by a lack of basic standards of business conduct. This is exactly what has been at stake in politics.
“Politics and political discourse have been damaged by falling standards.”
Tyrie got another – albeit brief – insight into how regulated sectors such as financial services work when he chaired the Competition and Markets Authority for two years until mid-2020.
His reform agenda made him unpopular, and he resigned, frustrated with his limited role as consumer advocate.
But it was his role in the autopsy of the 2008 crash that made him as big a name in the city as he was in Westminster.
Born in Essex, Tyrie grew up in Southend, the son of a successful Basildon trader. He saw firsthand the damage done to his father’s business by the three-day week, power cuts and “extremely high” levels of taxation in the 1970s.
He was special adviser to two successive chancellors – Nigel Lawson and John Major – and MP for the safe Conservative seat of Chichester for 20 years before stepping down at the 2017 general election.
But he never served in cabinet. Some senior conservatives, who would miss his inquisitive style, would have nicknamed him “Andrew Tired”. Others who saw him in action were more positive, praising his independent spirit. One of his most memorable and masterful guttings was that of Paul Flowers of the Co-operative Bank.
He asked the Methodist minister and former chairman of the UK’s eighth-largest lender to “roughly” estimate the size of the bank’s balance sheet after a £1.5billion hole in its accounts.
A pissed off Flowers blurted out a figure of £3billion. Tyrie bluntly reminded him that the real number was £47billion. “He seemed to know little about his bank,” Tyrie recalled. A few days later, in November 2013, The Mail on Sunday caught Flowers buying Class A drugs from a dealer in Leeds, earning him the nickname “The Crystal Methodist”.
Tyrie compared the 2008 financial crisis to a runaway train that no one saw coming because they were too busy examining their own part of the way. “During the last accident, everyone was wrong,” he recalls.
This time, regulators are “better equipped to see the big picture”, he insists.
“Regulation is less siloed, but easily turns by default into a back cover and tick box exercise. What is needed is open-mindedness and qualitative judgement.
“Regulation is in better shape than it was, but the regulators themselves also need constant scrutiny.
“Even if you don’t spot the crash, you can at least think creatively about how you’re going to deal with its effects to mitigate the damage.”
But the response to the Swiss authorities’ latest banking blasts – arranging a forced marriage between stricken Credit Suisse and its biggest rival UBS – has been to tear up the carefully crafted rulebook and return to bailouts and back-stops.
“Plan A didn’t survive first contact with the enemy,” Tyrie notes. “But regulators have worked well together and at pace to try to stem the contagion from Credit Suisse and they deserve a lot of credit.” However, the speed of modern bank runs cannot be ignored either.
“The panic phase of modern financial crises seems to have turned into a brief, acute and very painful period that is particularly difficult to plan for,” he says.
Tyrie admits people say there’s “an element of trouble” about him, but argues he’s more interested in finding solutions to problems. He believes that better and more efficient regulation is the key.
He says: “My impression of regulators is that in these organizations the overwhelming majority of people are full of good ideas.
“We need to find ways to release those energies and find a way to ensure that their ideas are taken more seriously.
“It’s something I learned, scrutinizing and working with regulators.”
“I recognize that everything I have done over the years is just a drop in the ocean,” he adds.
As with the banks, he is cautiously optimistic about the City’s future.
He says: “Britain’s strength in financial services should not be taken for granted.
“The current success of the sector came very quickly thanks to a small number of reforms in the 1980s.”
But he warns: “This success can disappear as quickly as it arrived, and carry with it a large part of the industry.”
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