European Banking Union: EUC Report

Lord Hamilton of Epsom Excerpts

Thursday 24th January 2013 Lords Chamber

[Lord Hamilton of Epsom]

Like the noble Lord, Lord Kerr, I pay tribute to our chairman, the noble Lord, Lord Harrison. He has always been a very genial and capable chairman. I am particularly grateful to him for the fact that we now seem to be getting before our committee rather more representative witnesses, who on occasions represent the majority of the British people. Unlike the noble Lord, Lord Kerr, who I enjoy having on our committee—we have our differences but they are always agreeable ones—I am not going to speak too much about the Prime Minister’s speech as my noble friend Lady Noakes has a debate on it next Thursday, to which I hope to contribute. All I would say is that it is a very clever speech. Rather like the Old Testament, there are bits in it which suit absolutely everybody. It does not really matter whether you are a Europhile or a Europhobe. There is something in the speech to keep everybody happy.

On our report, I do not know how many people have actually read it; certainly not an awful lot of action has been taken on it. We must be well aware that the single supervisory mechanism has been adopted, but an awful lot of other things that were heavily recommended in our report have not. I refer particularly to the recovery and resolution directive, which is possibly equally important, if not more so. Of course, the intention was that it would be introduced at the beginning of this year. I now gather that the Dutch and others who see themselves as picking up the tab for ECB intervention into banks have backed off. They do not want to get involved in that anymore. They are going back on earlier undertakings, which is rather typical of how the EU operates most of the time. It takes two steps forward and one step back, and if everything gets rather difficult or if things, as it seems to believe today, are looking rather better, it is a wonderful excuse to do nothing. If that is the EU of which we all want to be part, that is fine, but it certainly does not seem to be the answer for the United Kingdom. Earlier this week, we had some witnesses who described the state of European banks as they now are: they are European in life but still remain national in death.

We are now in a very significant situation. The problem with the EU is that it does things, with enormous reluctance, only when faced with a very major economic crisis. You merely have to lurch from one crisis to another before any difficult measures are taken. There may be people in this House who are dreaming of the day when Europe moves towards much greater integration but it is quite difficult to see how that will happen. It also seems quite clear that it will happen only when there has been one crisis after another.

In 2011, the Prime Minister called for the “big bazooka”. He wanted a major move made that would stabilise the sovereign debt crisis in the EU. What happened? Absolutely nothing happened and things got worse and worse. Interest rates on Club Med debt went through the roof. It became such a crisis that eventually the Germans agreed that Mario Draghi should make his statement that he would do anything necessary to stabilise the eurozone. At that stage, the markets calmed down. It was only because it took that long for German agreement to come through and, by that time, confidence had been undermined all over the eurozone. Sovereign debt was getting completely out of control. Investment decisions were being put on hold. When you get that across a large economic area such as the eurozone, you see the economy moving into recession and things getting very much worse.

I always get a wonderful narrative from my son-in-law, who is German and works for a German bank in London. He says that Merkel is playing a fantastically clever game. She is delaying like mad and restructuring the economies of countries in the eurozone. But what she has actually done is bring recession across the whole of the eurozone. Germany itself is now in recession. That does not strike me as being statesmanship. It comes as no surprise to me that she has just lost some Länder elections in Germany. I will be quite surprised if she wins the general election in September of this year. I do not think that there is much to be happy about with the way in which the eurozone is performing at the moment.

Earlier this week, our witnesses said that eurozone bank indebtedness would disappear like the snow in the sunshine once we had economic growth in the eurozone. There are two problems with that. First, we have absolutely no idea of the scale of bank indebtedness in the Club Med countries in the eurozone. However, we know that we are reaching a situation where a number of countries—because they are faced by serious social problems—have said that their banks cannot repossess properties and throw people on to the street. That means that people in those houses stop paying their mortgages because they cannot afford to do so. The next thing you have is moral hazard when someone says, “Well, hold on, my neighbour is not paying his mortgage repayments because he can’t. But I think I won’t pay mine either, although I can”. That leads to a very major problem in the banking sector because all the mortgages are going wrong and you are talking about sliding property prices anyway.

I agree that economic forecasting seems to have gone a bit wobbly right across the board, but if there is any consensus it is that there will be absolutely minimal growth in the eurozone for the next two years. I do not think there is any point in looking much beyond that. However, two years is a long time to have no growth and no relief on this side of things. For that reason, the banking crisis is certainly not over. If the ECB is not going to make itself liable for bank debt, another banking crisis will lead to a sovereign debt crisis and we will be back in much the same situation we were in a few months ago.

There are also serious questions about how much freedom the ECB has to buy sovereign debt. Officially, it is not allowed to print money and the Germans are desperate to try to keep a hold on how much money the ECB spends. They want to pass resolutions in Parliament before very much more money is extended to the ECB. We must accept that, although the recovery and resolution directive has not gone through, there probably will be a crisis which will eventually force it through. Then we will have a very interesting situation. There has been a lot of comment in this debate already about whether we are covered by a double lock voting system in the European Banking Authority. But, come on, let us live in the real world. In the real world, the executive arm will be the ECB, which will make up the rules as it goes along. I do not think that it will constantly refer back and say, “We have a crisis on our hands. Is the EBA happy that we can do this, that or the other?”. I think that the guidance that will come from the EBA will be extremely broad in anybody’s language and that the ECB will become very much more powerful as it goes along.

We also have the problem of what on earth we do about democratic accountability. It is not going to be a very satisfactory situation when the ECB moves in on a large bank and says, “This thing is going absolutely nowhere. Its liabilities are appalling. We must lay off half the people, break it down and get it into a more sensible state”. That will not be a popular move when thousands of people are put on the street. You can imagine that at that point the local politicians will all say, “This is nothing to do with us, you know. It is the ECB that is doing this. We don’t like to mention it but it is the Germans standing behind them”. That is the sort of situation you are going to get. If you have no democratic accountability—there is absolutely none as regards the ECB—you will have some very serious problems when things start to go wrong with banks. This is all far from being satisfactory and does not bode well at all for those eurozone countries which desire this great process of integration.

[Lord Kerr of Kinlochard]

The problem of democratic accountability is very real, as described, but I think that everybody is well aware of it. Certainly the European Parliament is extremely well aware of it, which is why it is linking the two texts. The ECB text is nothing to do with the European Parliament but it will not agree it until it has agreed the EBA text, which is to do with it. I am sure that it will insist on some sort of democratic accountability provision being built in.

[Lord Hamilton of Epsom]

I wish that I shared the noble Lord’s confidence, but I do not. I cannot see where this democratic accountability is going to come from because at the end of the day the EBA is the only thing that has any democratic accountability, and if it is laying down broad policies and the executive action is being taken by the ECB, that is where the rub is going to come—with the executive action being taken by the ECB. Perhaps something will happen, but there does not seem to be much sign of it at the moment.

We will face crisis after crisis, which will merely prolong the uncertainty and the general conditions that we have in the eurozone today whereby people are still very reluctant to invest in this area and stagnation seems to be continuing. Resentment will increase. Everybody says that we need a completely integrated fiscal union in the eurozone. Well, come on. You will have a growing problem with the Germans resenting massive transfers of money to the Greeks—to talk in extremes. The Germans will not allow those transfers of money to take place without enormous conditions being placed on the Greeks. The Greeks will all riot in the streets because they will say that the terms under which the money is being transferred are too stringent, and the Germans resent giving the money. Is this the sort of Europe we want to live in? Already we are beginning to see very extreme parties appearing in Greece. Everybody goes on about the fascists in Greece, but you have to bear in mind that the communists are much bigger than the fascists and much more likely to win the next election. Either way, we are seeing very extreme parties emerging.

Then we have the Prime Minister’s speech and the idea that we should have a referendum in 2017-18 on whether we should be in or out of the European Union. If the eurozone is going absolutely nowhere and is no better than it is today, as many people think will be the case, I cannot see this country ever voting to stay within the European Union.

--- Later in debate ---

[Lord Dykes]

My Lords, it is always a pleasure to follow the noble Lord, Lord Davies of Stamford, because, whatever other interests and policies he has in his mind, he is always a very robust, fervent and positive European. We need more of that in this country. I am glad, too, that in recent years the Labour Party has become much more positive on Europe following the passage of the Lisbon treaty. That is a very good development for this country. It can emulate the good example of the Liberal Democrat party as being always in the vanguard of the pro-European position—patriotic Britishers, of course, but also enthusiastic Europeans, and those two things can go closely together.

Yesterday the Prime Minister made his sad speech—actually, it was not a sad speech but a sad occasion. One has to acknowledge that there were some good bits in the speech and, as my noble friend Lord Hamilton of Epsom said, he tried to appeal to everyone, and in that sense was quite clever. However, it was a sad occasion because he has unleashed for himself a number of very disturbing things, depending on how they develop in future, that are going to destabilise British politics significantly. I will return to those themes in my concluding remarks.

Many good things have been said so far about the EBU report. I shall refer to it briefly but that is not to decry its quality. In fact, we in this House are used to having reports of high quality from the European Union Select Committee and its sub-committees. I am going to embarrass the noble Lord, Lord Harrison, deliberately by saying that this report is outstanding. I thank him and his sub-committee members for having created this excellent report.

It highlights, in a disturbing and worrying way, the acute complexities of the architecture of the system. A number of significant members, led, I suppose, by the United Kingdom, which, in a way, is the largest of them, are not going to be involved in this important developing system and framework. That is a matter of great concern, and the sooner we have the courage to align ourselves with these proposals, the better. That may take some time, and of course nationalism raises its ugly head all the time and we have to contend with that. My noble friend Lord Hamilton of Epsom would not admit this or agree with me but, as a result of being driven out of the exchange rate mechanism in 1992—that hugely humiliating moment under a Conservative Government—the United Kingdom was subsequently very scared of the euro, afraid of the single currency, nervous as hell about what it might develop into and always looking for things to go wrong.

The fact that the report looks at the way in which this new system will control the banks—the clearing banks, the joint stock banks, the commercial banks and the other banks—in the eurozone area is an outstanding achievement. I want to quote from what was said by President Van Rompuy, but first I will give way to my noble friend.

[Lord Hamilton of Epsom]

Does my noble friend accept that if the United Kingdom were in the eurozone today, with the deficit that we are running and the debt levels that we have, we would be in intensive care?

[Lord Dykes]

I do not agree with that, and anyway it is too theoretical even to consider. By the way, our deficit is £100 billion and we have a free-floating currency that has now been devalued about eight times since the war, either formally in the marketplace or informally. It is interesting to measure and to see where that got us when we were kicked out of the exchange rate mechanism by market forces, when the Treasury was for a moment probably the worst ministry of finance in Western Europe. It has not carried on being like that—it recovered and has produced some very good decisions since then—but that was the lamentable position at the time.

President Van Rompuy, who met the committee, is quoted in the third paragraph on page 57 of the report as saying that,

“the EU was in a better place than a few months ago. No-one was now speaking about imminent eurozone collapse. Although the problems had not disappeared, things were ‘on the right track’ but the EU might ultimately need to give Greece more time”,

which is a very fair point. In the preceding paragraph, he also said that he had to remind the committee that these member states—sovereign member states, all of them—are very lively democracies, so it takes time to reach these decisions. So, although people complained about the process being slow, the slower it was, the better the structure that was emerging, as I hope the Minister will agree.

In the third paragraph of the summary, the committee states,

“we welcome the publication of the Single Supervisory Mechanism proposals as a significant first step towards banking union. We agree that the European Central Bank, to be given ultimate supervisory responsibility for every euro area bank, is the only organisation with the necessary credibility and authority to take on this role”.

When the Minister comes to sum up, will he deal with that matter and the concern that the committee expressed about the concentration of so much power and its practical effects on the institutional banking market place?

In paragraph 3 on page 7, the report states:

“Although the Government have made clear that the UK will not participate in a banking union … the UK’s decision not to participate, should not and need not adversely affect London’s position as the leading financial centre in Europe, nor undermine the single market. The strength of this argument may soon be tested”.

That is quite an ominous point and I would welcome the Minister’s reassurance on that matter.

I repeat my warm thanks for a truly excellent report. It has helped a great deal in taking an immensely complicated subject further. In his distinguished opening speech, the noble Lord, Lord Harrison, set an admirable precedent by referring to yesterday’s referendum decision and so on. I should like to conclude by making a few points on that in this debate.

It was a sad day for the reasons that I have suggested and the effects will be very disturbing as time goes on. I am very glad to see that the Deputy Prime Minister, quite rightly, established a different position—that there might in future be a need for a referendum depending on the outcome of any negotiations, but to threaten one now, when no negotiating posture is being created and there are many years to go before we reach the end year of this decision-making suggestion, will create a great many difficulties and uncertainty, particularly in the business world. There have been many comments to that effect.

It is sad that we have got ourselves into the position of being the bad member of the club. It is a great pity. It is rather foolish of this country to lecture other countries on the crucial importance of competitiveness and efficiency in their economies when we have a terrible statistical deficit in our own trading and do not have a very strong economy. To suggest to the Germans that they need to improve their economy in comparison with English examples is going too far. I wish I did not have to say that, but that is the reality of the situation. The Germans remain modest about their economic achievements.

The sheer awkwardness of examining the subjects in this report while not being in the eurozone will come out more and more as time goes on. If we could only restore our courage and become a mature and enthusiastic member of the European Union, it would be very good for this country.

There were some interesting points made in the press yesterday about Mr Cameron’s speech. In an article today in the best newspaper in the country—the Guardian, of course—Martin Kettle states:

“Cameron’s speech was not brave. It was reckless. The brave stance yesterday was Ed Miliband’s, sticking to Labour’s practical pro-Europeanism and refusing to follow suit. Instead, yesterday marks the moment when Cameron’s pragmatic centre-right political project finally bent the knee to the ideological fantasy about Europe that still grips the Tory party”.

Anthony Hilton, who has been a long-standing supporter of the euro and the eurozone and now feels that the eurozone has passed the danger point—after all, it has never been a weak currency; it has always remained a strong currency despite the crisis and it is only that there were four or five weak members of that currency which had to have assistance provided by collective action—says in today’s Evening Standard:

“If Cameron thinks these concessions”—

to what I believe he used to call the head-bangers—

“are going to appease his lunatic fringe and calm things down, he might equally consider applying to be Prime Minister of the planet Zog. The sad reality of his capitulation to Eurosceptic pressure is it virtually guarantees that Tory backbenchers and their media acolytes will talk about nothing else between now and an election which is still two years off”.

Of course, they might be tempted to cite the Irish as saying that it will be a good occasion, they are quite relaxed and will go along with it, but that is not true either. I quote the Irish reaction in today’s Irish Times, where Arthur Beesley says that,

“it is readily acknowledged in official circles that the British debate and uncertainty over its EU membership have clear potential to destabilise European politics and create friction with other member states”.

Finally, I shall quote my right honourable friend in the other place, Sir Menzies Campbell:

“This was never about the UK; it was always about Ukip. The declarations of satisfaction which came from the Tory right immediately following Mr Cameron’s speech were disturbing for those of us who are supporters of European engagement. Mr Cameron’s speech had nothing to do with Britain’s place in Europe and everything to do with his leadership of a bickering and divided party. Tory leaders of the past who have had to fight sections of their party over Europe have found it an unrewarding experience. Mr Cameron is fated to be among their number”.

I regret that because I think that in many ways Mr Cameron has been an excellent Prime Minister and a very personable senior political colleague, so it is a great shame that he has allowed himself to be put in that position.

As my noble friend Lord Hamilton of Epsom said, there is to be a major debate in this House next week on the decisions that were announced yesterday and the future outlook, in which I hope to take part. I shall therefore leave it at that for the moment, but it is part and parcel of everything that we will examine in our Select Committee and its sub-committees. It is all about the huge complexities of Britain remaining a bad member of the club and refusing to co-operate in these matters when co-operation is absolutely essential.

Banking: Offshore Accounts

Lord Hamilton of Epsom Excerpts

Tuesday 20th November 2012 Lords Chamber

[Lord Newby]

I can reassure the noble Lord that we are being constrained not by European Law but by international accounting standards. There is no suggestion that Starbucks and the other companies are breaking the law but the accounting standards allow them to manipulate the point at which they take a tax charge on revenues that they raise.

[Lord Hamilton of Epsom]

My Lords, would it be possible to stop Google paying the minimal amount of tax as it is an international global company in whatever part of the world where the tax is the lowest?

[Lord Newby]

This is why we need increased international co-operation and why the G20 initiative is so important. Obviously if people can just shift off all their revenues to a low tax jurisdiction, some companies are going to do so. We are working very hard with our international partners on this because we have a common interest in making sure that these companies pay a fair share of tax.

EU: UK Net Contributions

Lord Hamilton of Epsom Excerpts

Wednesday 24th October 2012 Lords Chamber

[Lord Sassoon]

What I can confirm is that the UK’s priorities for expenditure include the following: substantial cuts to the common agricultural policy. However, I agree with the noble Lord that priorities for the UK include growth and competitiveness, climate change and external action. I am not going to speculate on how the negotiations will play out.

[Lord Hamilton of Epsom]

Will my noble friend confirm that, in the absence of any compromise, what is being asked for by the European Commission is a 6.8% increase in the budget? Is this not an extraordinarily high figure which shows an unbelievable insensitivity to the problems that Governments are facing across the EU as they try to rein back their deficits?

[Lord Sassoon]

Yes, I completely agree with my noble friend.

Financial Services Bill

Lord Hamilton of Epsom Excerpts

Monday 11th June 2012 Lords Chamber

[Lord Sassoon]

My Lords, I beg to move that this Bill be committed to a Grand Committee.

[Lord Hamilton of Epsom]

My Lords, this Bill is of major importance—this is not my idea; it comes from the Minister—and is very significant indeed. However, for some reason the Minister wants to shuffle it off into the Grand Committee Room. The Bill needs close scrutiny and will bring forth the exquisite qualities of your Lordships’ House. There is a massive amount of expertise here that can make positive comment on the Bill and make it better than it is today. It would be quite wrong if we were to vote for the Bill to go into the Grand Committee Room. It should be debated in Committee on the Floor of the House and I hope that the committal Motion will be negatived by the House.

[Lord Foulkes of Cumnock]

My Lords, it is seldom that the noble Lord, Lord Hamilton, and I agree. We were introduced into the House on the same day and I found it a privilege to be introduced on that day. However, I fully agree with him on this issue. I returned from the Recess to find this Motion on the Order Paper. I was not aware of it before and, as far as I know, there was no consultation about it. Members did not know that it was going to be remitted to a Grand Committee. I may have shown a lack of acuity in picking this up but I have discussed today the fact that many Members were not aware that it was going to be suggested that this important Bill should be committed to a Grand Committee.

As the noble Lord, Lord Hamilton, said, this is an important issue. It may not be politically contentious but it is vital. As the Minister said, it arises to some extent from a major financial crisis that hit the headlines. He described the Bill as major legislation and, after talking with Members who have been in the House much longer than me, I believe it is very unusual for such major legislation to be remitted to a Grand Committee for discussion. As the noble Lord, Lord Hamilton, said, it would be normal for it to be taken on the Floor of the House.

There may be other reasons—far be it from me to suggest them—why the Government want to remit the Bill to a Grand Committee, but our decisions as Members of the House should be on the merits of the Bill and not on any secondary reasons beyond the basis of the Bill.

It would be unfortunate if we had to divide on this, so I urge the Minister to withdraw his Motion on the basis that there will be further discussion and consultation with all parties and all sides of the House. I hope he will see fit to do so.

EU: Euro Area Crisis

Lord Hamilton of Epsom Excerpts

Thursday 24th May 2012 Lords Chamber

[Lord Hamilton of Epsom]

What does my noble friend think about the article in the Times yesterday in which the German Foreign Minister said that within the European budget there were resources that could be used to stimulate the eurozone economy, including about €80 billion which remains unspent as we speak?

[Lord Sassoon]

My Lords, within what needs to be tight discipline—tighter than has been exhibited in recent years—over the overall European budget, certainly these ideas of targeting funds better within the existing budget envelope need to be looked at very hard.

Euro Area Crisis: EUC Report

Lord Hamilton of Epsom Excerpts

Monday 21st May 2012 Lords Chamber

[Lord Marlesford]

When Sub-Committee A looked at the bailout, we saw again and again that the figures produced as necessary to prevent a catastrophe became ever greater by magnitudes. There is the old cliché about “A billion here and a billion there—you are talking serious money”; we almost reached the stage where it was “A trillion here and a trillion there”. If the prospects are for bailout, and that just continues, whatever happens and however much worse it gets, it has been fairly conclusively proved that people will take advantage of a bailout. It is human nature. It was the present governor of the Bank who said that if there is a run on the bank, the sensible thing is to join it. Therefore, if the bank is prepared to bail you out, the sensible thing is to accept the money.

My solution is that you impose a requirement to earn the euros—but with some help through the IMF, eurobonds, or eurobond investments—and you are thus able to rebuild your economy. I do not see, from the point of view of people living in Greece, that there is much difference between perhaps starting off with saying, “We are going to recreate the drachma; and the drachma is equal to a euro”, and then finding that the next day it is worth only half a euro, or, as the noble Lord, who likes speculating on these matters, might think, the drachma would soon be worth only a quarter of the euro. It would be a great deal better to recognise that the flexibility of having to have the euros with which to buy and pay for things would itself generate a reality that, I believe, is lacking.

[Lord Hamilton of Epsom]

I am rather uncertain as to how, if the Greeks basically default but stay with the euro, they would raise new debt in euros.

[Lord Marlesford]

I do not think that they could do so as such, except that, as I say, you might have a euro project in which people would invest. It would perhaps be somewhat similar to the private finance initiatives that have been used by the British Government—not entirely with success, maybe, but on balance they have been a useful source of making things actually happen. If people could see a good return, they would invest in it. That is a perfectly sensible way of doing it and, therefore, Greece would not be able to raise euro debt as such, unless the markets thought that that was viable. That is where the self-discipline is. The self-denial of recourse to the printing press would be a solution. I suppose I am really saying that if we get this form of self-discipline, which reality should require, and if this were to work in the case of Greece, it could be an example to other countries either not to follow suit and to grasp the nettle for themselves, or to recognise that this would be a viable way forward.

Independent Commission on Banking

Lord Hamilton of Epsom Excerpts

Monday 19th December 2011 Lords Chamber

[Lord Sassoon]

My Lords, the ICB estimates that the increased cost of borrowing could be of the order of 0.09 per cent to 0.16 per cent as a result of implementing these proposals. That is a very modest additional cost which is well within the smallest ever incremental change to the bank rate introduced by the Bank of England. I will not speculate about what might happen to bank customers where they are sold from one bank to another, but I believe that it is completely right that we should make it easier in all circumstances for bank customers to be able to switch their accounts. That is what the banking system is going to deliver.

[Lord Hamilton of Epsom]

My Lords, like my noble friend Lord Lawson, I shall sleep at night only when retail banks and investment banks have separate shareholders. Will the noble Lord answer my noble friend’s point about the ingenuity of those who run banks to find a way round the ring-fencing, thereby enabling retail banks to continue to back investment banks?

[Lord Sassoon]

My Lords, as I have said, the way that the governance will work is that the ring-fenced subsidiary will have to have independent directors in the way that, for example, regulated utilities have to have directors who are independent of the holding company’s board. That is the principal protection in these circumstances.

EU: Credit Rating Agencies

Lord Hamilton of Epsom Excerpts

Monday 3rd October 2011 Lords Chamber

[Lord Sassoon]

My Lords, I have already said that the credit rating agencies got it completely wrong when it came to the rating of structured products. As a result of that, there have already been two regulations, so-called CRA1 and CRA2, out of Europe since the crisis and a third set of proposals is expected in November this year. The first two sets of proposals address the matters which the noble Lord raises. There is now a system of registration. There are new regulations around conflicts and how to handle them, as well as around transparency and disclosure. I agree that the issues he raises are serious, but they are very much the ones which the European regulations have addressed.

[Lord Hamilton of Epsom]

My Lords, does my noble friend accept that there are great shortcomings among the credit agencies when it comes to derivatives and so forth, but that that does not extend to their rating of sovereign debt? Does he further accept that when Standard and Poor’s downgraded American debt, that debt then became cheaper and bonds went up?

[Lord Sassoon]

I agree with my noble friend. I know that he was a member of your Lordships’ sub-committee which produced an excellent report published in July. Among its conclusions is that:

“The criticism that credit rating agencies precipitated the euro area crisis is largely unjustified; their downgrades merely reflected the seriousness of the problems that some Member States are currently facing”.

Banking: Northern Rock

Lord Hamilton of Epsom Excerpts

Thursday 30th June 2011 Lords Chamber

[Lord Sassoon]

I have made clear on this and previous occasions that the Government regard mutualisation as a desirable model. It would be wrong to say that it is the best model, as the noble Lord has suggested, but, indeed, we want to see variety of provision of financial services in this country by organisations with different models, of which mutualisation should be one.

[Lord Hamilton of Epsom]

Will the noble Lord explain how we can have mutualisation and the taxpayer get his money back at the same time?

[Lord Sassoon]

My Lords, the overarching aim of any sales process, as well as getting a clear exit, is to obtain best value for the taxpayer. There are of course tensions between that objective and certain methods of sale, and that is precisely what the experts conducting the sale will assess.

Greece: Default Contingency

Lord Hamilton of Epsom Excerpts

Monday 20th June 2011 Lords Chamber

[Lord Hamilton of Epsom]

My Lords, would my noble friend like to comment on press reports that Standard Chartered Bank is ceasing to be involved in short-term interbank transfers with European banks? Does he believe that to be true? Is it happening with other British banks? If so, what are the implications?

[Lord Sassoon]

My Lords, I am not going to comment on what is going on in the markets and with individual banks at all, and I am sure that my noble friend would not expect me to. However, I would make the point, which was also made in the Statement, that UK banks have been able, in very tough market conditions, to improve their funding position very considerably over the past year and more. The overall situation of the interbank market is far better—although we should not take any of these things for granted—than it has been at points during the financial crisis. It is therefore important, as my noble friend reminds us, that confidence within the banking system enables there to be liquidity. As I say, we are in a much better position in that respect than we were during the financial crisis itself.