Royal Bank of Scotland: LIBOR

Lord Sassoon Excerpts

Wednesday 4th July 2012 Lords Chamber

[Lord Empey]

To ask Her Majesty’s Government whether and when they were made aware by the Royal Bank of Scotland that the bank had dismissed employees for inappropriate behaviour in relation to setting LIBOR rates.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the Government are aware that several banks are being investigated by the Financial Services Authority in relation to the setting of the LIBOR rate. While the investigation is going on, it would be inappropriate to comment on any specifics relating to the Royal Bank of Scotland. My right honourable friends the Prime Minister and the Chancellor of the Exchequer announced the Government’s response to the LIBOR issue on Monday.

[Lord Empey]

I thank the Minister for his response. Before I ask my principal supplementary question, I ask: will the Minister comment on the disastrous handling by RBS Group of the customers of Ulster Bank, who are still suffering over two weeks after the crisis began?

With regard to my main Question, will the Minister tell us what instructions he has given to UK Financial Investments Ltd, which looks after taxpayers’ interests with regard to shares held by the Government in various banks? Can he assure the House that the reporting mechanisms back to the Treasury as principal shareholder, particularly in RBS, will be such as to enable the Government to pick up evidence of any malpractice or inappropriate behaviour at an early stage?

[Lord Sassoon]

My Lords, on the RBS/NatWest/Ulster Bank IT failure, RBS has assured customers that nobody will be left out of pocket as a result of the problems. There is a Question down for tomorrow—number 4—from the noble Lord, Lord McAvoy, that touches on Ulster Bank, so I am sure we will return to that tomorrow.

On the instructions to RBS and the monitoring of them, the Government manage their shareholdings in RBS at arm’s length through UK Financial Investments and the governance arrangements are set out in the framework document and the investment mandate between UKFI and the Treasury. It is all there transparently on the website. I believe that those arrangements continue to be appropriate for the arm’s-length management. As it happens, UKFI published its annual report only this week. It sets out a very full account of the issues that it has been engaged in with RBS and with Lloyds Bank. I believe that all the appropriate channels are there and that there is a high degree of transparency. I can reassure the noble Lord on that.

[Lord Davies of Stamford]

My Lords—

[Lord Flight]

My Lords, will the Minister advise the House how many banks from how many countries provide regular LIBOR information in order to produce the average LIBOR rate?

[Lord Sassoon]

My Lords, I was looking at the setting of one of the rates the other day, and there is a panel of 18 banks. I think that is typical of the number of currencies and the different time horizons, so it is of the order of 18 or so banks on each one. Of course, they are typically the complete spread of global banks. It is by no means an activity of UK banks, notwithstanding the name of the rate.

[Lord Morris of Aberavon]

My Lords—

--- Later in debate ---

[Lord Morris of Aberavon]

Will the Minister confirm that the legal provisions for the offences of conspiracy to defraud and false accounting are sufficiently wide to cover most, if not all, of the wrongdoing in this field?

[Lord Sassoon]

The noble and learned Lord clearly points to a couple of very important offences in this area, but in the various inquiries that my right honourable friends have announced we also want to see whether there are any gaps. There is one obvious and glaring gap, which a Front-Bench spokesman from the Opposition conceded a couple of days ago, in that FiSMA is defective in the sense of not allowing direct prosecution for LIBOR fixing under the regime, and that needs to be put right.

[Lord McColl of Dulwich]

In view of the poor behaviour of the banks, could we consider changing the name “bank holiday” back to its original name, “Lubbock Day”? The workers used to call them St Lubbock Day, after the distinguished MP, the grandfather of the noble Lord, Lord Avebury.

[Lord Sassoon]

It is a fascinating suggestion. Thank you for that.

[Lord Eatwell]

My Lords, the Minister will be aware that at Prime Minister’s Questions today my right honourable friend Ed Miliband emphasised the need for great speed in sorting out the issues around the LIBOR scandal, and the need for more considered speed with respect to wider issues. Surely the greatest speed would be achieved by a judicial inquiry which could now sit for five days per week. How many days per week will a parliamentary inquiry sit?

[Lord Sassoon]

My Lords, it is not a question of trading how many days one inquiry or another will sit. I could read out the long list of judicial inquiries that have taken two, three, four, five or 10 years and more. We believe that a parliamentary inquiry can do its work effectively by Christmas. These matters will be debated in another place tomorrow.

[Lord Davies of Stamford]

My Lords—

[Lord Elystan-Morgan]

My Lords, going back to the Question asked by my noble friend Lord Empey, can the Minister tell the House, without going into specifics, what was the first point in time at which the Government gained any information about the possibility of the rigging of LIBOR?

[Lord Sassoon]

My Lords, I am tempted to go back into history beyond the last two years but the answer is that I cannot. It would be inappropriate to discuss that while investigations are still going on.