Independent Commission on Banking

Debate between Lord MacGregor of Pulham Market and Lord Sassoon

Monday 19th December 2011 Lords Chamber

[Lord Sassoon]

First, I do not accept that the Government’s logic drives towards complete separation any more than the ICB itself argued for it. The ICB and the Government believe that there are efficiency and other benefits in allowing banks to keep the two parts of the business together under one holding company. However, the principal protection in the areas to which the noble Lord refers is that there will be limits on the exposures of the ring-fenced bank to other parts of the group. That is what, in particular, will deal with the noble Lord’s concerns.

[Lord MacGregor of Pulham Market]

My Lords, in the recent hearings of the Select Committee on Economic Affairs, the banks accepted that the Vickers report is more or less a done deal but argued that the costs would be considerably higher than those that Vickers calculated and the costs that the Government have estimated today. If in the forthcoming negotiations there is a major dispute about costs and their possible effect on customers, will the Government keep reminding the banks that there is still more to be done to contain costs on bonuses, salaries and other payments?

[Lord Sassoon]

I agree with my noble friend’s sentiments on costs and I have stressed in the Statement that the position of the Bank of England, at this time in particular, is that banks should be using profits they generate to rebuild their balance sheets rather than pay out bonuses. However, to differ a little from my noble friend, I do not see this as representing any negotiation with banks over the costs. The ICB carried out an analysis, and the Treasury made a separate analysis that has resulted in different figures. We have used the input of the banks and their modelling in order to arrive at those numbers. We have come up with numbers for the costs that were higher in some areas than those originally estimated by the ICB. They are very much based on a lot of numbers that the banks themselves have modelled. I do not see a negotiation to be had in that area.