Banking (Asset Protection Scheme)

Part of Oral Answers to Questions — Solicitor-General – in the House of Commons at 11:34 am on 26 February 2009.

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Photo of Alistair Darling Alistair Darling The Chancellor of the Exchequer 11:34, 26 February 2009

On the last point that the hon. Gentleman made, there has been a lot of debate about whether banks should be separated, so that they organise themselves along the lines of what that they had in America for many years, with what he calls low-risk retail banks and, on the other hand, investment banks. I would just remind him that the first bank that got into trouble in this country was not an investment bank but Northern Rock, which is a retail bank. The problems have been experienced both by banks with complex models, and by investment banks pure and simple—indeed, many have now collapsed—and retail banks. The regulatory system should distinguish between the two. Perhaps on another occasion there will be an opportunity to discuss what we need to do on supervision and regulation.

In relation to the hon. Gentleman's broader point, about nationalisation—the one on which he takes fundamental issue with the Government—I just disagree with him. We have, as it happens, nationalised a bank already: Northern Rock. However, I have always made it clear that our long-term objective is to get that bank and the banks in which we have shareholdings operating back into the private sector. That is something with which the Liberal party and he agree. I therefore do not believe that it is in our interests to completely squeeze out the remaining part of the private shareholdings in RBS, which is what nationalisation would entail. Also, as we have 70 per cent. of the votes there, it is beyond doubt that we control the bank. It is not as though it could block a decision that we really insisted upon.

It is important to strike the right balance. Even in these times, we need to look at the long-term destination of those banks. It is right that we should strike that balance, as I said earlier this morning. I just think that the hon. Gentleman is plain wrong in what he said about that.