Critical Benchmarks (References and Administrators’ Liability) Bill [HL]

Lord Moylan Excerpts

2nd reading
Wednesday 13th October 2021 Lords Chamber

[Lord Moylan (Con)]

My Lords, in following my noble friend Lord Altrincham and his maiden speech, I start by saying that I think it is the first time since I came into your Lordships’ House a year ago that a maiden speech has been delivered with members of the family present in person to hear it. I take that as a very encouraging sign for our return to normality and a sign of great confidence. I thought it worth mentioning.

There is another first going on at the moment. This is, as my noble friend explained, the first time since 1963 that an Altrincham has sat in your Lordships’ House. That was something of a vintage year for departures from your Lordships’ House: I note that another peerage is returning that has been absent since 1963, though on the opposite Benches. Who knows what fruit might yet be harvested from that vintage year?

My noble friend is a banker. It is very brave nowadays to say you are a banker, and he had the courage to confess that he has spent most of his life as an investment banker. He has advised Governments and major companies, and since then he has gone on to set up his own corporate finance firm. Unlike some bankers—in the context of this Bill, I think everyone will know what I mean—his reputation for integrity in the course of his career has not only emerged intact but, in fact, been enhanced.

However, my noble friend is more than simply a banker. As he said, he has a keen interest in mental health issues, arising from his own family’s experience. His wife Rachel’s books have brought consolation to countless readers suffering from depression and, indeed, quite a lot of joy to those not suffering from depression. They are rather good and useful books in their own right, I have found. My noble friend will use part of his time in your Lordships’ House to promote interest in and support for mental health problems. I am confident that, with his great gifts and broad sympathies, he will make a wonderful contribution to your Lordships’ House.

Turning briefly to the matter of the Bill, we have come today to bury Libor. Not many people know—perhaps there is no reason why they should—but I spent a number of years lecturing on financial services and capital markets, and Libor was the meat and drink of what I did. I rather feel that Libor is something of an old friend. I have listened and learned a great deal from speakers in this debate so far about the very fine technical points that are at issue and dealt with in this Bill, but I would feel bereft if an old friend such as Libor were to be buried without someone like me at least reminiscing, in a mournful and doleful tone, about its departure. My old friend will be greatly missed.

As my noble friend the Minister said in his letter circulated before the debate, this is the only critical benchmark left that is generated in London. The loss of that is a harm to the prestige of London as a financial centre. It also raises a very small question mark about the robust connection with the legal profession and the documentation of financial services transactions. It is one of the boasts of London as a financial centre that the documentation is done under English law. Part of that was that connection with Libor, and that is gone. I do not think we are advancing when we see the City of London—not just the financial side but the associated legal side—lose the only benchmark generated in London.

Who killed my old friend Libor? A certain number of people have suffered criminal convictions and that is part of the answer, but the suggestion was also made at the time that the Bank of England was reasonably aware of what was going on. That suggestion—I know I am straying a bit into the history of the matter—was of course robustly denied by the Bank, but in 2008 or thereabouts the Bank was trying to drive interest rates down for monetary-management reasons while a very uncertain market, faced with a great deal of risk, was trying to put interest rates up, and to some extent Libor was the victim crushed between those two forces. Of course, I have no reason to doubt the Bank of England’s denial of that allegation, but I am sure that in the course of time more will be learned—although I do not know if I will be alive when it is.

Could my old friend Libor none the less have been resuscitated? I think in fact he could have been. If our regulators had had more confidence and less fear, and if they had not had removed from them at the time their earlier obligation to maintain the competitiveness of the City of London as a financial centre, I think that, with imagination, something could have been done to retain a London-based benchmark.

Of course, it is all too late for that. We are here simply to invite in the undertakers, and there is no going back. However, I hope that my noble friend and the Government will learn at least one lesson from this: if we are to have, as I hope we will, a successful and indeed internationally dominant financial services sector in this country—with the benefit that flows from that to other professional services such as law, accountancy, and so forth—then we need to have a clear framework for regulators that directs them to support that competitiveness and encourage the success of the City of London. Regulation is not all about risk minimisation. After all, if one were to minimise risk utterly, there would be no banking—it is a risk business by definition.