Debates between Jeremy Quin and Catherine West during the 2015-2017 Parliament

Royal Bank of Scotland

Debate between Jeremy Quin and Catherine West
Thursday 5th November 2015

(8 years, 11 months ago)

Commons Chamber
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Jeremy Quin Portrait Jeremy Quin
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I am grateful for the wisdom and insight that has flashed on to my hon. Friend’s machine. His staff are very attentive and I look forward to them providing me with the IMF report so that I can go through it in great detail. I look forward to discussing it with him later. I am being intervened on from all sides. My hon. Friend makes me take on board the £500 billion mentioned by the IMF, while the hon. Member for East Lothian (George Kerevan) simply wants us to hit the five pounds tuppence per share. I am being pulled in different directions, but we all agree that RBS needs to be productive for the real economy.

That takes me to the heart of the motion tabled by the hon. Member for Edmonton. The long-delayed and long-drawn-out splitting off of Williams & Glyn from RBS has cost billions and taken a huge amount of management time. With the best will in the world, splitting up such organisations takes time, effort and money. I am really concerned that it could be an unnecessary distraction to try to pull a bank in as many as 130 different directions, as the hon. Lady proposes. I fear that the creation of multiple banks will lead to multiple dis-synergies and create entities that will find it much harder to access capital markets. It could be a very costly distraction and I am very nervous that it would not act in the interests of the broader economy. There are advantages that flow from a large, well-capitalised and well-regulated bank being able to spread its assets across the UK.

Although I wish the initial public offering of the Clydesdale and Yorkshire Bank well, if it goes ahead in the new year, I fear that investors prefer the spread of banks across asset classes and across the whole of the UK, rather than regional entities. One only needs to remember the passion in this place regarding the steel industry to recognise how a major problem can have a ripple effect on small and medium-sized enterprises locally and cause huge problems for a regional economy. I fear that capital markets would reflect those risks in a higher cost of capital and scarce resources, particularly in those very areas of the country where we all wish to see the maximum amount of lending.

Catherine West Portrait Catherine West
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It think we could be convinced if the number of loans being given to small businesses since 2008 had rocketed. Instead it is flat because, quite rightly, the banking sector is looking inwards, although that is not to be encouraged. What incentive can Government policy create to make banks lend to the small businesses that keep our constituencies going?

Jeremy Quin Portrait Jeremy Quin
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I will make a negative point and a positive point. On the negative side, I do not think that tackles my concern that smaller banks would have higher costs of capital and scarcer resources, making them less able to lend to smaller businesses. I think the hon. Lady would agree—my hon. Friend the Member for Hazel Grove certainly would—that there is still a huge crisis in confidence in the major banks, and the last thing a lot of small businesses want to do is ask for a loan, because they are worried about the rug being pulled from underneath them. That process is going to take years to address.

Internationally, I do not think that the United States, given its overall funding strategies and the use of capital markets by corporates, presents Europe with a useful analogy. The caja banks in Spain were regionally focused and regionally driven, and they made huge investments in regional projects, but they have been a disaster and brought the Spanish economy crashing down. I acknowledge the historical success of Sparkassen and Landesbanken in Germany, but I fear that what happened to them during the crisis could happen elsewhere. The inability of Landesbanken to get local lending projects that more than met its cost of capital meant that it ended up taking on very risky investments in Europe, which helped to precipitate the Eurozone crisis