G20

Lord Myners Excerpts

Monday 15th November 2010 Lords Chamber

[Lord Strathclyde]

My Lords, I welcome the noble Lord’s words and his reporting back of his own visit to China. He is right that there are elements of the protocols on climate change on which we have to go a great deal further. As the premier economic forum, the G20 is right in recognising the importance of low-carbon growth in preventing climate change and creating a sustainable global economy and in sending positive signals ahead of Cancun, but the meeting at Cancun is the key forum for negotiation on climate change. None of us should have false hopes about what is going to happen at Cancun. Immensely difficult decisions need to be taken. It is only a few weeks away now, and we shall have to wait for the results of that to see whether we have succeeded in our objectives.

[Lord Myners]

I welcome many of the Prime Minister’s comments, in particular those about protectionism and rolling back those areas where protectionist measures have already been taken. I take great encouragement from the Prime Minister’s positive statements about the Doha round and the need to address imbalances. On both sides of the House we accept the need for growth in global economic activity, although on this side we believe that the policies the Government are currently pursuing are alien to good growth outcomes.

However, the Prime Minister overstates the achievement in the banking industry. I express my grave concern at the lack of real progress. The Prime Minister referred to Basel III being completed within 18 months. With all respect to the Minister, nothing has been achieved under Basel III, which is not due to be implemented until 2018 and, in some respects, 2023. Not a single bank has had to increase its capital as a result of Basel III. We have seen no material progress on the identification and agreement of process for globally systemically important financial institutions. We have seen no progress on the agreement of a net stable funding ratio. These are all critical to creating a more stable banking system. Is the noble Lord pleased with the progress that has been made under Basel III? If so, could he identify the tangible things that have happened as a result of it?

[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.