Banking System — Question

– in the House of Lords at 2:50 pm on 9th February 2015.

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Photo of Lord Soley Lord Soley Labour 2:50 pm, 9th February 2015

To ask Her Majesty’s Government what steps they are taking to rebuild confidence in the banking system.

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, a successful and respected banking sector is of great importance to our economy. That is why the Government have taken wide-ranging action to ensure the integrity and stability of financial services in the UK. For example, the Government now require banks to ring-fence their riskier operations. They have also criminalised the manipulation of LIBOR and a further seven benchmarks and legislated to introduce a senior managers certification regime.

Photo of Lord Soley Lord Soley Labour

Does the Minister accept that the latest Bank of England financial stability report indicates that this is not just about financial resilience but also about governance? As reports today in the Guardian and elsewhere demonstrate, it is governance that is such a failure at the moment. Will he say, very specifically, whether he agrees with the British Chambers of Commerce that we need a British business bank which would enable growth to take place in the UK economy? It is a very important proposal and one that ought to get urgent support.

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, we do have a business bank. This Government have created one and it is growing very rapidly. As for standards, I completely agree that the standards that are adopted by bankers need to improve. Of course, the industry has itself recognised this by establishing the Banking Standards Review Council.

Photo of Lord Razzall Lord Razzall Liberal Democrat

My Lords, I am sure the Minister is aware that the recently publicised excesses of HSBC’s Swiss subsidiary occurred under the regime of the previous Government. Does he believe that the system of banking regulation introduced by this Government would have made the excesses of HSBC less likely?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, I think that all those involved in banking before the crash adopted laxer standards than they now accept are necessary. I know from discussions that I have had with senior representatives of HSBC before today that the new regulatory regime is far more intrusive and has been forcing them to address the way they do business in a manner which I am sure all noble Lords will welcome.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

My Lords, should not those who ran HSBC when it was selling tax evasion packages be held to account? By whom should they be held to account?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, there are several elements of holding people to account. I think the shareholders need to hold them to account. If there has been any criminal wrongdoing it is obviously for the police and prosecuting authorities in the relevant jurisdictions to pursue those matters.

Photo of Lord Eatwell Lord Eatwell Non-affiliated

My Lords, I am sure the Minister will confirm that the agreement with Switzerland to reveal tax information was made in 2011, after the coalition Government took office. Does he believe that confidence in the banking system is enhanced by the fact that concrete evidence of a major bank aiding and abetting tax evasion was comprehensively ignored by the coalition Government?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

No, I do not. As for the first part of the noble Lord’s question, the agreement with Switzerland, which he seems to deride, has generated £1.2 billion for the Exchequer. That is £1.2 billion more than was being generated under the previous Administration.

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Transport), Shadow Spokesperson (Treasury)

My Lords, this information was available to the Government when they took office. How is it, then, that the former chairman and chief executive of HSBC during this period was made a government Minister?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, the process by which people become Members of your Lordships’ House and are made Ministers involves them being vetted by the House of Lords Appointments Commission and the appropriate bodies within government. As far as I am aware, there is no evidence that the noble Lord, Lord Green, was involved in any of this sort of activity.

Photo of Lord Soley Lord Soley Labour

The Minister cannot be allowed to get away with this. He is being incredibly complacent. The governance problem with banks has been there for years under all parties and it is fair to say that none of them has done enough about it. He is still not saying what he will do to ensure that the governance of banks, not just their financial resilience, is dramatically improved.

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, I have spent much of the past five years in this Chamber legislating to improve the governance of the banks. We have passed several major pieces of legislation to make long overdue improvements in the ways in which the financial services sector is managed. For example, we have introduced too-big-to-fail processes of various sorts, the ring fence and the bail-in, as well as new standards for senior managers in banks. All of these things will improve the way in which banks are managed and a number of them were actively opposed, when they were in government, by the previous Administration.

Photo of Baroness Uddin Baroness Uddin Non-affiliated

My Lords, on another aspect of banking and confidence, is the Minister aware that a number of well respected charities, particularly those working in developing countries, have had their bank accounts closed without any explanation or notice? Is he aware of that and, if so, has he had any representations from these groups? If not, will he accept a delegation of some of the groups affected disproportionately by this measure?

Photo of Lord Richard Lord Richard Labour

I wonder whether the Minister feels encouraged by the strong and vocal level of support that he has had from the Benches behind him. One thing that has been very notable is that not a Conservative has got to his feet, and I wonder why. Would the noble Lord agree that for banks to become respected they have to earn that respect? Would he also agree that they have a very long way yet to go?