Monetary Policy Committee

Lord Maples Excerpts

Wednesday 6th July 2011 Lords Chamber

[Lord Newby]

My Lords—

[Lord Maples]

My Lords—

[Lord Strathclyde]

My Lords, we have time for both noble Lords. We can have the noble Lord, Lord Newby, and then the noble Lord, Lord Maples.

[Lord Sassoon]

Yes, I completely agree with my noble friend.

[Lord Maples]

My Lords—

[Lord Stern of Brentford]

My Lords—

--- Later in debate ---

[Lord Desai]

My Lords—

[Lord Maples]

My Lords, consumer price inflation is only one measure of inflation. May I suggest that if in the run-up to the crash the Monetary Policy Committee had been looking at asset price inflation—

[Lord Strathclyde]

My Lords, there are two noble Lords trying to speak. We are on 22 minutes and perhaps we should go on to the next Question.

Regulatory and Banking Reform

Lord Maples Excerpts

Thursday 16th June 2011 Lords Chamber

[Lord Sassoon]

I am grateful to my noble friend because this is a technical but very important area. He is completely right that there is a fundamental distinction between supervision and regulation and often texts can be loose on this. I hope that when he has a chance to read the White Paper he will see that there is extensive discussion of these areas. I refer him to the interesting remarks of the governor last night about the approach to supervision which he intends the Bank and the PRA under it to adopt in the new world, and that that should be a very different approach to supervision from what we have seen recently with the FSA. I take my noble friend’s points to heart, but the short text of the announcement does not give the full flavour that lies behind it.

[Lord Maples]

I have a couple of quick points on the ring-fencing proposal. Does what the Chancellor said last night mean that we have finally ruled out the idea of a complete split between investment banking and commercial banking? Secondly, does the Minister agree that for ring-fencing to work, the ring-fenced commercial or high-street bank will need a strong degree of independence on its board of directors to enable it to stand up to the banking group of which it is a part?

Thirdly, the Minister’s point about how many holes there are or how permeable the ring-fence is is important because presumably the purpose of the ring-fencing is to stop the investment banks’ liabilities appearing on the commercial banks’ balance sheets as assets, or for that matter the liability of any other investment bank. If that permeability is there at all, investment bankers will find some way of using the commercial banks’ balance sheets to their advantage.

[Lord Sassoon]

My noble friend makes some important points, which the independent commission has in the forefront of its thinking to resolve over the next few months. It is not that we have ruled out everything but that we have set up an independent commission. It came up with the ring-fencing proposal in its interim report and that is what my right honourable friend the Chancellor has endorsed, subject to the caveats included in the Statement. My noble friend’s points about how this is worked out in detail are some of the absolute correct ones.

Banking

Lord Maples Excerpts

Wednesday 9th February 2011 Lords Chamber

[Lord Sassoon]

I am grateful to my noble friend for allowing me to emphasise that the banks have at the heart of their intention on all lending to make sure that there is absolutely universal coverage across the United Kingdom. On the question of how businesses are put in a position to come forward, one of the most important elements of the banking task force is its proposals for mentors for businesses. Whether that is mentoring businesses to put them in a better position to apply for and take up loans or having a much clearer system of principles around lending and appeals processes, there is certainly a package of measures which goes to the points my noble friend rightly makes.

[Lord Maples]

My Lords, may I suggest to my noble friend that the central issue here is the rate of growth of credit, which is at the bottom of all banking crises? It does not matter what system of regulation is in place if it does not bring the rate of growth of credit back in line with the rate of growth of the economy. There has been a considerably faster rate of growth in credit. If that continues, we are going to have another banking crisis, whatever the system of regulation may be. Perhaps I may ask a specific question. One of the reasons the banks have made so much money over the past couple of years is that the Bank of England has been lending them money—money that it does not have, incidentally—at an interest rate of around 0.5 per cent. The banks have been able to lend that money on at 4, 5 and 6 per cent and thus have made a huge amount of money, out of which they are paying bonuses, presumably on the basis that it has been their clever management that has made all this money. Has my noble friend pointed out to them the value of this subsidy, and has he indeed calculated the value of this subsidy towards banks’ profits? We needed to help them rebuild their balance sheets, but that was why they were being lent money cheaply by the Bank of England. They are booking that as profits, attributing it to their own clever management, and paying themselves bonuses out of it.