Banking Reform

Lord Bates Excerpts

Thursday 14th June 2012 Lords Chamber

[Lord Sassoon]

The noble Lord, Lord Desai, as always, brings up important points. Of course, living wills are an integral part of the whole construct for better resolution of banks than we had before. Indeed, the FSA has been leading the project for a couple of years or more to make sure that all the arrangements are in place. The noble Lord draws attention to another important part of the construct.

[Lord Bates]

But can my noble friend confirm that the banking crisis actually cost the taxpayer, in direct cash, loans and guarantees, close to £500 billion—£465 billion pounds? Therefore, it behoves the Government to take some action to protect savers and the interests of the taxpayer in this regard. The introduction of the leveraging ratio is therefore welcome, particularly as it follows international norms rather than putting our industry at a competitive disadvantage.

I have one small, technical point. The Minister has an incredible grasp of the detail, but does my noble friend have understanding of whether there will be any implications of introducing that leverage ratio for the Government’s holdings in Lloyds Banking Group and RBS?

[Lord Sassoon]

I am grateful to my noble friend for pointing out the extraordinary cost of the banking crisis. He cites one figure; I think that the estimates ranged from £140 billion upwards. They are extraordinary figures, which, as I said at the outset, the then Government did not seem to think required any response. I completely agree with my noble friend Lord Bates that something needed to be done, and that is what we have brought forward.

As for the effect on the Government’s holdings in RBS and Lloyds, I am sure that your Lordships like reading, as I do, the fine detail of impact assessments. At the back of the White Paper, the impact assessment contains several paragraphs analysing the effect. It gives a number on a rather theoretical comparison of what the effect might be, but then points out that this is probably already priced into the market so that the price of the holdings today takes account of what is proposed.