Banking Reform

Lord Higgins Excerpts

Monday 4th February 2013 Lords Chamber

[Lord Newby]

My Lords, the Government share the noble Lord’s support for the mutual sector. It is interesting that, over the past couple of years, the mutual sector has been doing very well: Nationwide and the Co-op have been growing rapidly, which we very much welcome. We also welcome some of the specific decisions that have been taken by banks such as Nationwide, under which people who want a mortgage will get preferential treatment if they have had an account with that mutual for some time before they asked for it. That situation was commonplace a generation ago.

[Lord Higgins]

My Lords, some aspects of this answer are certainly welcome, not least in respect of speeding up the clearing of cheques and so on. However, can my noble friend be a little clearer on precisely what the situation is? Are the Government coming down in favour of a ring-fenced arrangement, which will be electrified? If so, is it not important that we electrify the loopholes as well as the ring-fence? Can he make it clear, if the system really is effective, how the position of a bank operating under it will be any different from having a split between the two sides of the bank?

[Lord Newby]

My Lords, on the first question, as to whether we are having full ring-fencing and whether we are electrifying the loopholes, I think, to take the analogy on, that if you have a proper, electrified ring-fence, there are no loopholes. First, the aim of the electrified ring-fence is to set up a very robust system. Secondly, the electrification not only allows the bank that has transgressed to be dealt with but will act as a very severe deterrent to prevent banks transgressing in the first place.

There is a rather long technical answer to his second question, which I am happy to give, but I suspect, given the time, that I will have to do it on another occasion.