Banking: Bonuses

Lord McFall of Alcluith Excerpts

Tuesday 11th January 2011 Lords Chamber

[Lord Sassoon]

My Lords, all I can say is that I will listen to any ideas. I did not hear the question at the end of the four ideas put forward but I am willing to listen to all ideas from noble Lords on a whole range of topics. I am always listening but I am puzzled that when the noble Lord had so much time in government to put those ideas into operation he did not think that they were so good at the time.

[Lord McFall of Alcluith]

At the Treasury Select Committee this morning Bob Diamond is reported to have said that Barclays is in the position that it is not too big to fail. Does the Minister agree with that statement and, if so, does that mean that if any big bank in distress comes to the Government in future the taxpayer will not be on the hook?

[Lord Sassoon]

I am grateful to the noble Lord, Lord McFall of Alcluith, for reminding us that there are other challenges as well as bankers’ bonuses to be resolved. The too-big-to-fail one is absolutely at the heart of strands of ongoing work. I did not have the opportunity to listen to the whole of what Mr Diamond said to the Treasury Select Committee but I certainly believe that whether it is in the work of the Independent Commission on Banking or in the discussions that are going on in international fora, the question of how to resolve bank failures is one to which we need to continue to give considerable priority. We are reminded that the question of the structure of banking is multifaceted and we should not focus exclusively on one aspect of it.

Loans to Ireland Bill

Lord McFall of Alcluith Excerpts

Tuesday 21st December 2010 Lords Chamber

[Lord McFall of Alcluith]

My Lords, I commend the Government for this loan to Ireland initiative and I commend in particular the speech of the noble Lord, Lord Bew, which emphasised the social relationships. I come from Dumbarton, which has a very big Irish population. Indeed, my own family is part of the Irish diaspora. For many years, we have had very solid social contacts, and there is a part of my former constituency that is known as “Little Donegal”. When the 2001 election was put off until June due to the foot and mouth outbreak, I was advised to go and knock on a number of doors in Donegal to shore up my support, but I felt that my majority was big enough that I did not have to cross the Irish Sea, which proved to be the case. So these social contacts are very important. There have been many fine Irish men and women living in my community for many years, a lot of whom fought with the British Army in the Second World War. They adapted to and assimilated the culture of the UK, notwithstanding the problems existing at a wider level between Ireland and the United Kingdom.

In its latest manifestation, we see the concept of a private debt crisis being transferred to a sovereign debt crisis. To repeat a phrase that has been used a lot in the other place, we are all in this together. That is because what is happening in Ireland affects every other country in the EU, including ourselves here in the UK. The situation is that the banks in Ireland have brought that country to the verge of bankruptcy. The tensions in Ireland that were mentioned earlier have been experienced in other countries. Ireland itself is contributing €17.5 billion from its pension funds to the very important €67 billion bailout, so the people of Ireland are already saying, “It is our money. We are contributing to this. The problem started off in the banks, but as a result of that situation, it has ended up on the streets”.

We all have a responsibility to ensure that we manage this economic process well, taking account of the social instabilities, so that we end up with a sound economic system and a stable social system. As was said earlier, there are good reasons for the UK to provide the loan, not least of which is the fact that Ireland is a major trading partner and that UK banks are exposed in Ireland. Only last week, Lloyds and HBOS declared a £4.3 billion loss on the banking group’s Irish loans. Lloyds said that it had sufficient capital to withstand the loss, but that situation is an illustration of the interdependence that exists between the UK and the Republic of Ireland.

As a former Minister for Northern Ireland, I am very much aware of the border between Northern Ireland and the Republic—it is so porous that it really is not a border. I well remember chairing an inquiry into the euro in 2002, when I chaired the Treasury Select Committee. One of our visits was to Newry, where the currency in use included the euro because people were travelling there from across the border. That interlink between Northern Ireland and the Republic should make certain that we provide a friend in need with a loan.

If instead of doing that we were to sit on our hands, economic stagnation would take place. We need a strong Europe if we are to make the most of our competitive exchange rate. That is what the Bank of England said. The loan makes historical, economic and social sense, so I commend the Bill to the House.

IMF and World Bank: Appointment Procedures

Lord McFall of Alcluith Excerpts

Wednesday 1st December 2010 Lords Chamber

[Lord Grenfell]

My Lords—

[Lord McFall of Alcluith]

My Lords—

[Noble Lords]

Order!

[Lord Sassoon]

I am very grateful to the noble Lord, Lord Grenfell, who speaks from immense experience. I completely agree with what he said.

[Lord McFall of Alcluith]

Undemocratic and non-transparent are the buzzwords of these institutions today. Will the British Government take the lead from the German finance minister who asked for lower representation for European countries so that the sub-Saharan and developing countries can get more representation and so that we have a big step on the way to democracy for these institutions?

[Lord Sassoon]

The Government are pleased with the recent agreements in the IMF and the World Bank that have seen a significant shift of voting and quota away from the developed towards the dynamic, growing economies.

Housing: Mortgages

Lord McFall of Alcluith Excerpts

Wednesday 10th November 2010 Lords Chamber

[Lord Sassoon]

My Lords, the level of new gross lending in the mortgage market is above levels seen throughout the 1990s, but, inevitably in this part of the economic cycle, it is low, as my noble friend said. Although loan-to-value thresholds are taken into account by the FSA for prudential purposes, they are not hard limits. The FSA says in its recent consultation paper that no case has been made for LTV caps on consumer protection grounds, and the FSA is not proposing to impose a maximum LTV cap. I note from just scanning mortgage products available on the internet this morning that there is still a range—admittedly a reduced range—of products with 80 per cent and 90 per cent LTV available.

[Lord McFall of Alcluith]

My Lords, will the Government keep in mind that the affordability criteria are important given that in the past three years more than 40 per cent of mortgages have been approved without proof of income? Will they accept that further checks and balances are needed in the mortgage market to protect consumers from mis-selling, and also to prevent another reckless housing boom?

[Lord Sassoon]

My Lords, I certainly agree with the noble Lord that questions of affordability should be addressed, which is why the FSA is carrying out the consultation. The consultation is due to close shortly and forms an important part of the FSA’s ongoing work to ensure a sustainable mortgage market for the medium term.

Housing: Shared Ownership

Lord McFall of Alcluith Excerpts

Monday 25th October 2010 Lords Chamber

[Lord Sassoon]

One of the beauties of the current system and our future system of financial regulation is that decisions about the relative riskiness of different classes of financial assets are emphatically not for government but for the financial regulator, which in due course will be the Bank of England. So while I can ask the Financial Services Authority to write to the noble Lord, I am certainly not going to second-guess its judgments.

[Lord McFall of Alcluith]

My Lords, are not all the building societies that became plcs now bust and out of business, and is there not a case for looking at mutualisation with responsibility? Surely the Government should be encouraging the FSA to go along those lines so that we have good mutual organisations, which have existed in the past, lending responsibly.

[Lord Sassoon]

My Lords, it is important that we have diversity and a variety of providers of financial services. In that context, building societies of course have an important role to play—particularly in the area of shared-ownership mortgages, which is the subject of the Question. Many building societies continue to offer products in this area, and I welcome that.