You CAN’T stop boom and bust warns Andrew Tyrie

Andrews Tyrie is known as Chief Inquisitor during the post-mortem on the latest financial crisis. Owlish and Rectorial, with a questioning and beady eye for detail, he earned a forensic reputation for forensically piercing his victims as Conservative chairman of the all-party Treasury Select Committee of MPs.

Now elevated to the House of Lords as an independent peer, the architect of several major regulatory reforms in the financial services sector has taken a keen interest in the latest wave of banking turmoil.

The recent collapses of Credit Suisse and Silicon Valley Bank — and now the wavering of Deutsche Bank — are “a warning to stay vigilant and not let our guard down,” he says. “The most important things to watch out for are short memory, groupthink and surrender to vested interest lobbying.”

As for the next crisis, he admits he doesn’t have a crystal ball. “However, one prediction I will make is that you cannot do away with the business cycle, as former Chancellor Gordon Brown suggested when he told us he had ended boom and bust.”

Tyrie, 66, speaks in the Commons meeting room where he held court – and where Boris Johnson had testified hours earlier to another group of MPs over claims he had misled Parliament about closed parties in Downing Street.

Halfway through the former prime minister’s televised testimony, committee members and Johnson had to pause for 15 minutes to vote on a new Brexit trade deal for Northern Ireland. Tyrie thinks Johnson was saved by the division bell during his prolonged but intermittent whims, as the pause gave him a breather from relentless interrogation.

“If a witness evades a question, the only tool available is to point it out intelligently and apply pressure from different angles over a sustained period of time during cross-examination,” he says.

He believes that “a drop in standards” links the 2008 financial crisis 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 way banks are governed to prevent another blowout.

The most important of these was the introduction of individual responsibility, especially for the management of risk.

“We were clearing standards,” he recalls. ‘Now the political community of both major parties is rightly engaged in a clean-up operation of the political discourse.

“Trust was one of the serious casualties of the banking crisis, which was caused by a lack of basic standards of business conduct. That is exactly what politics is all about.’

“Politics and political discourse have been damaged by a drop in standards.”

Tyrie had another – albeit short-lived – insight into how regulated industries such as financial services work when he served as chairman of the Competition and Markets Authority for two years until mid-2020.

His reformist agenda made him unpopular and he resigned out of frustration at his limited role as a consumer protector.

But it was his part 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 shopkeeper in Basildon. He saw with his own eyes the damage to his father’s company caused by the three-day work week, power cuts and ‘extremely high’ tax levels in the 1970s.

He was a special adviser to two successive chancellors – Nigel Lawson and John Major – and MP for the Tory safe seat of Chichester for 20 years before stepping down at the 2017 general election.

But he never served in the cabinet. Some senior Tories, reportedly bored with his inquisitorial style, reportedly nicknamed him “Andrew Tiresome.” Others who saw him in action were more positive, praising his independence of mind. One of his most memorable and masterful swipes 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 estimate ‘roughly’ the size of the bank’s balance sheet after a £1.5bn hole in its accounts.

A confused Flowers blurted out a sum of £3 billion. Tyrie suspiciously reminded him that the real figure was £47 billion. “He didn’t seem to know much about his bank,” Tyrie recalls. A few days later, in November 2013, The Mail on Sunday caught Flowers on film 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 investigating their own piece of track. “In the last crash, everyone was wrong,” he recalls.

This time, regulators are “better equipped to look at the bigger picture,” he emphasises.

‘Regulation is less isolated, but it all too easily falls into an underhanded, tick-box exercise. What is needed is an open mind and a qualitative judgment.

‘The regulations are in better shape than before, but the regulators themselves also have to be constantly monitored.

“Even if you don’t see the crash, you can at least think creatively about how you’re going to handle the consequences to limit the damage.”

But the response to the Swiss authorities’ latest banking blowouts — arranging a gun marriage between stricken Credit Suisse and its larger rival UBS — was to tear up the carefully crafted rule book and go back to bailouts and back-stops. .

“Plan A did not survive first contact with the enemy,” Tyrie notes. “But regulators have worked well together and at a fast pace to contain the Credit Suisse contagion and they deserve a lot of credit.” However, the sheer speed of modern bank runs cannot be ignored either.

“The panic phase in modern financial crises seems to have coalesced into an acute and very painful short period that is extremely difficult to plan for,” he says.

Tyrie admits that people say there is “an element of the disruptor” in him, but states that he is primarily interested in finding solutions to problems. Better, more effective regulation is the key, he says.

He says: ‘My impression of supervisors is that in these organizations the vast majority of people are full of good ideas.

“We need to find ways to release that energy and find a way to get their ideas more seriously considered.

‘That’s something I’ve learned, researching and working with regulators.

“I recognize that what I’ve done over the years is just a drop in the ocean,” he adds.

As with 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 because of a small number of reforms in the 1980s.”

But he warns, “That success could disappear as quickly as it came, taking much of the industry with it.”