Banking

Lord Newby Excerpts

Wednesday 9th February 2011 Lords Chamber

[Lord Sassoon]

Indeed, I completely agree with the noble Lord, Lord McFall. With regard to the Merlin agreement, the fact that the five highest-paid senior executive officers now come within the remuneration disclosure is very important. As the noble Lord will know, senior executive officers typically encompass not only those responsible for managing the key divisions but also people such as the chief financial officer and the chief risk officer, who are at the heart of controlling risk in the system. Therefore, I think that the noble Lord’s point is very well made and, as I said, the Government will consult on this issue in the forthcoming year.

[Lord Newby]

I think the Minister for repeating the Statement and I agree with him that the noble Lord, Lord Eatwell, should surely be directing his moral outrage at his colleagues—not least the noble Lord, Lord Myners. If it was so easy to make all the changes which he is castigating the Government for having failed to make, I wonder why none of those changes was implemented by his Government.

A number of measures in the Statement are welcome. I welcome the fact that cash bonuses for the part-nationalised banks are limited to such a small amount. The noble Lord, Lord Eatwell, may not think that £2,000 maximum cash bonus is a change, but if you ask bankers whether they think that it is a change, I suspect that they would have a different view. I also welcome the fact that the banks in their statement said that they aim to foster more demand in lending to SMEs. Given that the view of the SME community over the past two years has been that those banks have been thwarting demand and that one of the main problems has been the attitude at the top level of those banks on lending to SMEs, if senior management in those banks get their regional people to foster more demand for loans, there will be more loans. That is clearly what we want.

I want to make two points for now. First, there is a rather curious suggestion about consultation on disclosure of the highest paid earners. That is the proposition that the banks should publish the pay of the board plus eight of the highest paid senior executive officers. Eight seems to be a figure plucked out of the air. Surely it would be more sensible for the Government to consult more widely and, in particular, to consider whether disclosure should not apply to everyone in the banks who earns above a certain amount.

Secondly, as the noble Lord, Lord Eatwell, pointed out, the Banking Commission is the next part of the story in the operation and regulation of the banks. The Statement simply states that the Government are looking forward to receiving the recommendations of the Banking Commission. That is an extremely weak statement. It implies that the Government will receive them, say thank you very much and then leave them on the shelf. Can the Minister reassure me that the Government will be minded to accept proposals from the Banking Commission and will not simply regard this as an academic exercise?

[Lord Sassoon]

I am very grateful to my noble friend Lord Newby for expressing some of the sentiments that I wish I had expressed as succinctly as he did about the Opposition's abject failure to have gripped these issues earlier, and for pointing out what a dramatic difference a mere £2,000 in cash makes to a senior banker who, under previous arrangements, would have been expecting to receive many multiples of that.

We will consult on my noble friend's specific questions and have no presumption as to where the outcome of the consultation will be on the remuneration/disclosure issue. There is no particular magic about the number eight, but eight plus two executives on the board, which there might typically be, would total 10. That is about double the number disclosed in, say, the US or Hong Kong so we are already exceeding disclosure in the US and Hong Kong and going further to a position which might double the number of directors whose remuneration is detailed. That seems to be a good point to start a consultation, but it will be an open one.

As for the independent Banking Commission, I can absolutely confirm that the Government do not remotely regard this as an academic exercise. We appointed the commission early after we took office because we thought that it was so important to get to the bottom of the issues about the structure of the industry, “too big too fail”, and so on. When my right honourable friend says “Look forward”, he means in a positive sense look forward to what will be a serious and important piece of work.