What information was it that that genderless person, or person of doubtful gender, provided in January of this year? The press seemed to suggest that the Price Waterhouse report of March 1990 was a pretty damning indictment of BCCI. If the Economic Secretary could give the House that sort of information tonight, we would then know whether the Bank of England acted with due diligence or was too tardy in its behaviour. As my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) said, it would be useful to hear about why Ernst and Whinney, now Ernst and Young, switched to Price Waterhouse in 1987–88. That debate between the two big accounting firms has been reported in the press.
The bar protocol of 1983, the international banking settlement, gave the option for a college of regulators to be set up when a banking problem was pan-national. In relation to BCCI, that college was set up in 1987–88. If it was set up in response to the bar protocol of 1983, why did it take so long? If it was not, what was there about BCCI in 1987–88 that led to the setting up of the college of regulators? Such clarification would make a great difference to the debate.
It would be interesting to know about the keenness of local authorities to get to the bottom of some of the difficulties. As I said in an intervention, the Treasury had a meeting with the committee on local authority borrowing on 10 May this year at the Treasury chambers in Parliament street. The minutes of that meeting show that a representative of the Bank of England, Miss Jean Noble,
commented that the bank had a statutory duty to step in as soon as depositors' funds appeared to be at risk.
I am sure that the Minister will quibble over the word "appeared". The minutes continued:
They acted on the behalf of depositors to minimise losses even though it might take time for depositors to get their funds back.
There is therefore a clear commitment by the Treasury that the bank should step in as soon as depositors' fund are at risk. At that meeting local authorities voiced their concern. The Association of British Counties said:
They worried about the risks for smaller banks' liquidities if local authorities lost confidence in this area of small banking as they switched deposits in larger banks.
We should not blame local authorities if, as a result of the speech by the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), they shift their deposits to mainland banks and cause problems. Local authorities were aware of such problems and asked about them in May.
One issue has not been debated since 5 July. Local authorities, small investors and small businesses had money in BCCI. It is odd to say the least that none of the big clearers had any open exchange trade with BCCI at the time of its closure at 3 pm on 5 July. Why was that? Normally there are open exchange trades of deposits and lending between clearers and secondary banks. There have been no reports of any of the clearers sustaining losses. We can either conclude that the clearers had spoken to the Bank of England some time ago and were well aware of BCCI's problems and were not exposed in the same way as local authorities, or—a more damning indictment, although I am sure that the Minister will clarify the matter—the clearers were tipped off and told to get out by 5 July because there would be a closure and local authorities would be left to stew. I am sure that the Minister will tell us whether some of the clearers got out 18 months ago. If they did, the message that prompted them to do so should have been passed to others in the financial system.
Some Conservative Members spoke about the role of brokers. Does the Treasury intend to look again at the grey code governing brokers and their actions? Is there a need to look at the regulations on brokers or to publish the rates that brokers are paid? It would be useful to know whether the Minister proposes even to look at such matters. A Conservative Member said that auditors should have a duty rather than a right to report fraud or potential fraud. I put that question last week to the Department of Trade and Industry and was told that the Department had no intention of examining the issue.
As hon. Members have said, we are facing a serious banking crisis and some knock-on questions should be examined. Auditing and the question of duty versus right to report fraud is one of them. The other question relates to qualified reports by accountants on companies. The hon. Member for Dover (Mr. Shaw) nods. He raised that matter. Price Waterhouse is on record as saying that it could not qualify accounts because the whole system would crack up. Surely it is incumbent on the Treasury or the DTI to say that if qualifying will rock the boat the Government will look at an alternative way to send a signal to local authorities and others about problems with accounts. We either change the system and have another flag, another indicator, or say to Price Waterhouse that it has not acted within the present legislation and is at fault. The Minister cannot have it both ways. Either Price Waterhouse has not done the job properly or the Government's legislation is inadequate.
Hon. Members have spoken about the status of the bank list and the hon. Member for Selly Oak said that Opposition Members are arguing that that list should authorise the deposits of local authorities. Even if the hon. Gentleman had been here for the whole of the debate, he would not have heard one Opposition Member argue for that. Local authorities thought that that list had some meaning. Why should they not? The Department of the Environment sent it to them and it had the Department's imprimatur. I do not suggest that the list guarantees deposits, but it indicates which banks are authorised.
Surely the hon. Member for Selly Oak can see that there was confusion and misunderstanding. Local authorities thought that it meant more than the bank thought it meant. Plainly the bank did not think much of it because by June it had not removed from the list Chancery or Edington, although they were in liquidation or administration. As the right hon. Member for Hertfordshire, North (Sir I. Stewart) said, we should look at that again. We should also look at the quality of the advice that the Bank of England gives to local authorities. We are asking only that the quality of information on the list should be examined.
The right hon. Member for Hertfordshire, North raised an issue that has not been mentioned much in the debate or in the press, although it is crucial for the future, and that is the whole question of Europe. In a year there will he a single passport on banking, and banking systems in other countries may not have even the bare necessities of banking regulations that exist in Britain. The Minister must tell us whether he is prepared to support a push for the levelling of banking regulations throughout Europe so that we are not exposed to the weakest link in the European chain.
We must also examine compensation schemes throughout Europe. We do not say that they should all be the same, but there should be convergence and understanding and the present consolidated supervision directive on compensation throughout Europe, which is in the bowels of the Commission, should be brought to light and politically backed so that when we are in the single market we are not faced with banking problems.
My hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) spoke about the compensation scheme. Conservative Members tried to portray us as if we were saying that people should have 100 per cent. protection and that we would then get into the savings and loan position of the United States Government. Not one Opposition Member argued for that. The least that any of us has asked for is an increase in the investment protection scheme so that in real terms it will be at the 1979 level when the £15,000 maximum was set. That maximum was reintroduced in the Banking Act 1987 and the original maximum was set 12 years ago. Surely that should be index linked in line with inflation. That is asking not for 100 per cent. protection but for a basic improvement in the investment compensation scheme.
Small investors and Asian business people in particular have been exposed to great problems. If the Government are committed to small businesses, the least that they can do for small businesses, which are going to the wall as a result of this banking collapse, is to give them a package. They need more than helplines, which are merely a sign of blowing in the wind. The only sensible part of the speech of the hon. Member for Selly Oak was his call for a package. Such a commitment would mean something to people.