G20

Lord Foster of Bishop Auckland Excerpts

Monday 15th November 2010 Lords Chamber

[Lord Strathclyde]

My Lords, I very much welcome the early remarks of the noble Lord, Lord Myners. He was agreeing with me so, naturally, I agree with him. The right approach is about growth, getting the deficit under control, international trade and fighting the battle against protectionism—a path other countries would like us to head down. The noble Lord can easily make the case that it is still too early to decide whether Basel III has been a success. It is true that there is a long transition period between 2013 and 2019, when it needs to be put in place.

Having said that, a significant strengthening of capital and liquidity requirements and a binding constraint on leverage are essential to strengthening financial stability. Therefore, we welcome the G20’s endorsement of the Basel reforms to global capital and liquidity standards. Full, consistent and non-discriminatory implementation of these new international standards is now crucial to minimise the risks of regulatory arbitrage and the fragmentation of international financial markets. The UK, as the noble Lord well knows, has consistently argued for strengthened international financial regulation to address the failings that were laid bare by the crisis. The G20 has agreed major reforms to international financial regulations and we aim to move these forward. The key to this is to maintain the momentum that has come from Basel and the G20.

[Lord Foster of Bishop Auckland]

It is impossible at the moment to persuade China to be more flexible over its currency. What is the Prime Minister doing to develop a powerful consensus that surplus countries have a responsibility equal to that of deficit countries in dealing with global crises?

[Lord Strathclyde]

My Lords, the noble Lord is right to say that one of the key issues has been the global imbalances. Part of what was discussed at the G20, and much of what was agreed on, was a protocol to reduce these global imbalances. The Prime Minister, in a speech at Peking University, said:

“We need a more balanced pattern of global demand and supply, a more balanced pattern of global saving and investment … We all share an interest and a responsibility to co-operate to secure strong and balanced global growth … just as China played a leading role at the G20 in helping to avert a global depression so it can lead now”.

That was the clearest signal to policy-makers in China that they need to play a full part in sorting out global imbalances. The recognition that we need to move towards more market-determined exchange rate systems was a vital ingredient of that and was agreed by all parties in the G20. I contend that that is a positive step forward.