Clause 156
Banking Bill
2:30 pm
Colin Breed (Shadow Minister, Treasury; South East Cornwall, Liberal Democrat)
No, at present, we support the scheme as it is put down. I am just saying that I do not believe that the scheme will be fit for purpose in the future. We have to decide how and when the taxpayer can genuinely underpin the sort of potential liabilities that the large banks will present us with.
When we had a multiplicity of much smaller banks and a vibrant building society sector, it was much easier to put together a compensation scheme that would be funded mainly by the banks and might require a small amount from the Government at some stage. That is not the case today. We have large institutions that are subject to some extreme policies, as we saw with Northern Rock, and are allowed to go far beyond the usual, prudent way. They are subject to all sorts of problems in computer-based trading operations in a market that moves extremely quickly and in which banks can both make and lose an awful lot of money.
Unless we have massive capital requirements, which would be internationally uncompetitive, or require a massive amount put into some pre-funded schemes, there will inevitably be recourse to the taxpayer to provide that sort of assurance. I am quite happy to go along with what we are trying to do because today’s circumstances require it, but I hope that the FSA and the Treasury will look again at how we can genuinely ensure that people get some sort of protection.
As soon as the Government indicated that they would stand 100 per cent. behind the banks, people put their money into something they thought was 100 per cent. safe. Why are we so shy about that? I see no reason why we cannot promote a much more vigorous national savings opportunity so that people can get a reasonable rate of interest with that absolute assurance. They can go outside that if they want to and look at some of the large banks that in general terms have no great difficulty in supplying such rates, but if we are to go through some compensation scheme that will stand behind large amounts, the situation is not satisfactory.