European Council

Greg Hands Excerpts

Monday 27th June 2011 Commons Chamber

[The Prime Minister]

There was a very lengthy discussion on the Schengen issues, and clearly there is some unhappiness among Schengen members about some of the pressures they face. There was a particularly long discussion about the fact that Romania and Bulgaria feel that they have now qualified for membership of Schengen and want to see that membership advanced. There are pressures within the Schengen area that clearly do not apply to the UK, but it is clear that some of the northern members feel that Schengen has not been operating in their interests in the same way in recent years, but the Council’s conclusions were pretty clear that Schengen is working and will continue.

[Greg Hands (Chelsea and Fulham) (Con)]

Does the Prime Minister agree that in the event of any breakdown in the eurozone, in assessing the potential banking liabilities in this country and abroad, by far and away the best thing we can do is ensure that there is, first, transparency in the banking system and, secondly, a proper set of stress tests in place so that we know what the potential liability for UK banks might be in future?

[The Prime Minister]

I think my hon. Friend is entirely right. The Governor of the Bank of England spoke powerfully about this and has set out what the liabilities of British banks are in terms of Greece. We need the stress tests to be transparent, and we then need them to be acted on by making sure that those banks that need to build up their reserves do so. One of the things I wanted to secure at the European Council was to ensure that the conclusions were very tough on this, because at the same time as they are operating these stress tests and arguing for more capital to go into the banks, some European powers are trying to water down the Basel requirements. It seems to me to be completely illogical to try, on the one hand, to strengthen a banking system to withstand pressure in the eurozone, and then to start weakening it on the other. I am thankful that the conclusions are pretty clear on that point.