Lord Eatwell
Main Page: Lord Eatwell (Labour - Life peer)
Lord Eatwell
My Lords, I am most grateful to the Minister for repeating as a Statement the Chancellor’s Answer to an Urgent Question in another place. The Government’s proposal that the Bank of England assume responsibility for macro-prudential supervision and oversight of micro-prudential regulation clearly involves major disruptive institutional change in the FSA and the Bank of England. I look forward to examining the details of these institutional changes tomorrow.
The changes clearly diminish the future role of the FSA. The Minister cited the views of the late Governor of the Bank of England on the reforms of 1997. Given the major role played by the noble Lord, Lord Turner, in modern thinking on regulatory reform, will the Minister give the House some insight into the views of the noble Lord on these proposals?
The Independent Commission on Banking announced by the Chancellor could herald the most important change in the structure and operation of the British economy since the war, an even more important change than the big bang. Given this importance, will the Minister tell us more about the composition of the commission? In addition to Sir John Vickers as chair, will the Minister tell us whence the members of the commission will be drawn? I am asking not for names but for some insight into what an independent commission will look like. Does he agree that my noble friend Lord Myners would be an ideal member?
Will the Minister also clarify the relationship between the work of the commission and the Government’s stance at the G20 meeting in Seoul in November? The Minister will recall that the G20 communiqué of September 2009 declared:
“We commit to developing by end-2010 internationally agreed rules to improve both the quantity and quality of bank capital and to discourage excessive leverage”.
That means that the Seoul meeting will be crucial in settling many of the issues that are included in the terms of reference of the commission, but the commission is due to report, we are told, by September 2011. Is that not 10 months too late? In another place, the Chancellor declared that the Government intend “to lead the debate” in the G20 forum. If that is so, does it not suggest that the Government will need to have made up their mind on a number of key regulatory issues before the commission reports? Will the Minister also tell the House whether Her Majesty’s Government support the G20 commitment to the establishment of internationally agreed rules, given that such rules will, of course, bind Her Majesty’s Government?
In discussing the Urgent Question, the Chancellor of the Exchequer suggested in another place that Her Majesty’s Government will follow the US authorities in requiring that all derivative instruments be traded on markets with central counterparties. Will the Minister confirm that that is indeed the Government’s position?
As we heard from the Minister, the Chancellor the Exchequer, referring to the tools of macro-prudential supervision, told another place:
“It is already clear that the tools will include … requirements that work against the cycle rather than with it”.
Is the Minister aware that Jacques de Larosière, the former head of the IMF, told the Economic Affairs Committee of your Lordships’ House on 10 March last year that the use of such tools of cyclical management is akin to the use of fiscal policy and that they therefore involve a significant transfer of power from the Executive and the legislature to the regulatory authorities, in this case the Bank of England? Given this extraordinary increase in the powers of the Bank of England, will the Government be considering changes to the governance of the Bank? Is it right that the role of chairman and chief executive should be combined in the person of the governor, an arrangement that diminishes the role of the court and seriously limits the public accountability of the Bank?