HC Deb 09 February 1989 vol 146 cc1229-51 10.15 pm
The Economic Secretary to the Treasury (Mr. Peter Lilley)

I beg to move, That this House takes note of European Community Documents Nos. 4794/88 on credit institutions, 9224/86, 4339/88 and the Supplementary Explanatory Memorandum submitted by the Treasury on 22nd July 1988 on the Own Funds of credit institutions and 6033/88 on a solvency ratio for credit institutions; and supports the Government's intention to ensure that the Commission's action in this field takes full account of United Kingdom interests.

I welcome the opportunity to debate these complex measures, which together will establish a single European market in banking. I take the opportunity to pay a tribute to the ever vigilant members of the European Select Committee, who have helped bring about the debate today. These are important measures. They will bring a significant benefit to a major British industry.

I will endeavour to be reasonably brief, in view of the obvious great interest in this subject in the House. These are complex measures, and to understand such measures it is often helpful to contrast them with the alternative approach that could have been taken.

There were in theory two paths that the Community could have followed to create a single market in banking: the path of harmonisation and the path of deregulation.

A harmonised banking regime would have meant each country discarding its existing regime, which had evolved to meet national needs and to which its own banking industry had adapted. To replace them it would have been necessary to agree on uniform procedures for authorising banks, common systems of prudential supervision, common rules for depositor protection, common standards of capital adequacy and solvency, and so on. There might even have been calls to establish a new central regulatory authority to ensure uniform application of those many standards which require subjective interpretation.

The chances of ever reaching agreement on such a harmonised regime by 1993, if ever, would have been slim, if not non-existent. If agreement had been reached the outcome would have been rigid and unadaptable. The transition to the new regime would have been very disruptive. Such a harmonised regime would have fitted each country's banking industry as badly as if everyone were obliged to wear the same sized shoes. Fortunately, the Community has trodden the alternative path of deregulation and has achieved it by two major steps.

The first is the mutual recognition of each country's banking authorisation. This is enshrined in the second banking directive. It ensures that a bank authorised in any member country can operate in any other member country without further authorisation—the so-called banking passport Communitywide.

Secondly, minimum standards are to be agreed for initial authorisation and continuing supervision. So the purpose of the own funds directive and the solvency ratios directive, which are before the House tonight, is to set the minimum standards for capital adequacy. The directives will prevent any regulatory undercutting. That is, they will prevent any country from giving its banks an unfair and distinctly unwise advantage by setting capital adequacy requirements below the agreed minimum. The British Government consider it important that this capital adequacy regime should be compatible with the international standards agreed in Basle at the Bank for International Settlements last July, based on the earlier work of the Committee chaired by Peter Cooke of the Bank of England.

Under the proposals before us, member states will remain free to set stricter standards of capital adequacy if they so wish. They will make their own arrangements for prudential supervision and authorisation, subject to the minimum requirements of the directives.

We believe this approach should be the paradigm for extending the single market in similar areas. I welcome the Commission's adherence to this approach in its White Paper concepts of harmonisation of minimum essentials, mutual recognition and home country control, both here and in other sectors.

Mr. Bowen Wells (Hertford and Stortford)

I wonder whether my hon. Friend can tell the House whether these measures can be adopted simply by majority vote or whether it is necessary to have unanimity in the Council of Ministers before they can be implemented?

Mr. Lilley

This is not an area where we or any member state has a veto. It is on majority voting.

In the first place, the approach that I have outlined—that of mutual acceptance of authorisation in the home country—makes it far easier to achieve an agreement. That is not to say that it is easy and my hon. Friend the Member for Hertford and Stortford (Mr. Wells) has just said that he recognises that there may be difficult issues at stake which will affect a country's national interests. However, it is far easier to agree on mutual recognition and minimum standards than to agree to a common standard on every particular aspect of banking regulations. Under the approach adopted by the Community, states are free to retain most of the systems that they already have.

More important than the ease or difficulty of achieving agreement, we believe that a single market, based, as these directives intend, on mutual recognition of different systems and common agreement on minimum standards, is superior to one based on a common regulatory regime. That is because, in a single market with different regimes, there is competition not just between banks but, to some extent, between banking regulatory regimes.

It is sometimes assumed that such competition between regulators must automatically lead to a reduction in standards. A sort of Gresham's law is thought to apply, whereby bad regulation will automatically drive out good. That is not so. It is of course necessary to set minimum regulatory standards to ensure the continuing soundness of financial institutions and to safeguard the interests of depositors. However, it is a mistake to suppose that a good regulatory regime will generally make banks authorised under it less competitive than those authorised under a weak regulatory regime. On the contrary, most customers would prefer to deal with banks which they know to be authorised and supervised by a strict and prudent regulator rather than banks authorised by a lax and incompetent regulator.

No supervisor, however good, can supersede the customer's ultimate obligation to be cautious about who he deals with. Caveat emptor still applies. However, he will be guided in his judgment by the standards applied by the supervisory body. The expression "as safe as the Bank of England" still quite rightly carries weight in people's minds. It lends an extra attraction to British banks.

People like to do business with those they can trust. I remember when I studied economic history being taught that the reason why the Quakers prospered was not that they were particularly assiduous in pursuing material wealth, but because they were known to be scrupulously honest and people liked doing business with them because of that. Therefore, in general, a good, strict regulatory regime may be a competitive advantage for those who are authorised under it.

Although we fully endorse the general approach of these directives, there are a number of issues about which the United Kingdom is concerned. The most serious issue is reciprocity. The provision as drafted requires that before a credit institution whose parent company is outside the Community can be authorised by any member state, the Commission must first decide whether the country concerned offers reciprocal treatment to Community credit institutions. No non-Community bank could be authorised to establish a subsidiary in London until the Commission was satisfied that its home country offered reciprocal freedoms to banks from each and every member state. The Commission inserted this provision into the draft directive without any consultation and at the last minute before submitting it to the Council last February. The result is that the draft provision is muddled and unclear. But it is clear that the Commission's proposals are potentially very damaging.

The potential for delay is horrifying. The potential for protection is even worse, and the threat to London's position as a major international financial centre, should the provisions in the draft directives be accepted, would be incalculable.

London has built up its pre-eminent position in this time zone by attracting banks from all over the world. Indeed there are, for example, more American banks in London than there are in New York. But although London has the most to lose, all EC countries are likely to find that foreign financial institutions were more reluctant to operate in the Community if the reciprocity provisions were incorporated in the final directive.

What is more, British banks operate throughout the world. They might face retaliation in non-Community countries if access to the British market were restricted because the Commission felt that particular overseas countries were not offering satisfactory reciprocal freedoms in other member states which have traditionally been more restrictive themselves.

The Commission has argued that the reciprocity provision is essential to strengthen its negotiating hand in the GATT Uruguay round. This I find a very worrying argument. It would be perverse in the extreme if the Uruguay round were to become a pretext for erecting new protectionist barriers.

All member states have indicated that they consider the Commission's proposals on reciprocity to be impractical as drafted. We have expressed the view that the second directive would be a far better measure without the Commission's proposed reciprocity provision and that we would like it removed. In the light of these comments, the Commission will be revising its proposals over the coming months.

Mr. William Cash (Stafford)

Can my hon. Friend indicate the balance of opinion in the Council on majority voting on reciprocity? Has he any idea how it might go?

Mr. lilley

As I mentioned, every member state was critical of the provisions, to different degrees and not always on the same aspects, but all found it unsatisfactory. Therefore, my hon. Friend can be reasonably confident that the Commission went away well seized of the need o change its initial proposals. We look forward to the Commission coming back in due course.

Our second main concern is the interaction between the second banking directive and the investment services directive which is on the stocks. On the continent most investment services are provided by banks, and the Community passport created by the second banking directive will enable banks to offer services throughout the Community. In the United Kingdom a large part of our financial service industry is not part of a bank. It is carried out by specialist investment institutions. Non-bank financial services firms will be given a similar Community passport under the investment services directive. But if the second banking directive were enacted before the investment services directive, continental banks offering investment services could be given an unfair headstart over the specialist firms. Fortunately we have been reassured by the Commission's clear statement that its intention is for both directives to be implemented at the same time.

We have one final concern which relates to e procedures to be adopted for amending the directives. Member states have unanimously rejected the Commission's proposed amendment procedure, since it fails to reflect the complexity of banking issues, and risks the adoption of new prudential requirements without the full agreement of banking supervisors. For the own funds directive an interim solution has been found, which reserves to the Council of Ministers the right to amend directives. For the other directives, we are now awaiting new proposals from the Commission.

Mr. Tim Smith (Beaconsfield)

My hon. Friend has said that he is unhappy about the reciprocity provisions in the directive. What is the position of the Government generally on reciprocity? Are they unhappy about the reciprocity provisions? If so, have they second thoughts about the provisions on reciprocity in the Financial Services Act 1986?

Mr. Lilley

The provisions in the draft directive are substantially different from those in our Financial Services Act or elsewhere on our statute book. They give the British Government the right to take a decision which will be politically sensitive—the Government taking the decision if there is even a need to do so. But we have never seen the need to operate those provisions. The provisions in the draft directive require in every case, prior to authorisation by a member state, the Commission to take a decision, for which it has three months in the first instance and longer in many circumstances. That is plainly a potential nightmare recipe for bureaucratic delay.

These are important measures which give the British financial services sector a chance to build on its strengths. We must ensure that the important reservations that I have discussed frankly this evening are put right, and with the support of other member states which feel as we do on such subjects as reciprocity we shall be negotiating hard to achieve that result.

We have been helped throughout by comments from and discussions with banking practitioners in this country, and it is right that that should be so, as it is on their enterprise and initiative that the success of the single market will depend.

10.30 pm
Mr. Stuart Holland (Vauxhall)

The Economic Secretary to the Treasury has just lauded reward for effort, and I certainly congratulate him on the effort with which he has stated his case.

While the proposals appear technical, they amount in fact to the terms and conditions under which finance capital will operate in the Community from 1 January 1993. They are therefore not simply matters concerning credit institutions: they are of major importance. Let us take, for example, the solvency ratio for credit institutions. The Economic Secretary addressed that in a rather effortfully laid-back way, considering only the technical questions, but the solvency conditions of financial institutions in the Community are of the first importance as we approach the 1990s.

It is a long time, for example, since major banks in western Europe went bust. It is over half a century since the Kredietanstalt failed in Austria, with repercussions not only in Europe but in the United States. At present, however—as hon. Members know very well—the United States banking system is in considerable difficulties. It owes as much in farm debt as it owes to developing countries. It is important for the Community—certainly its Finance Ministers—to address solvency issues, not simply in terms of harmonising down to, or up from, 8 per cent. or any other percentage but in the context of what problems banks in Europe will face in relation to banks in the United States or elsewhere in the 1990s.

The latest press reports on the committee reporting to the President of the Commission—a committee composed mainly of governors of central banks—say that it is considering United States Federal Reserve-type arrangements, but with the powers that the Federal Reserve had prior to the Roosevelt new deal reforms in the 1930s. That should also be considered in relation to solvency questions, and I urge the Government to bear in mind the fact that such a Federal Reserve bank proved impotent to counter the collapse of the United States banking system or the ensuing slump in the 1930s.

I am not saying that we shall have a slump in the 1990s, but we may have a considerable protracted period of recession in the world economy. If we are to take advantage of a European dimension to conditions involving solvency in financial institutions—this, of course, concerns all financial institutions in the Community: banks, credit institutions, building societies and so forth—we should address the likely creditworthi-ness of Europe's private financial institutions through a decade that could be one of very low growth in the world economy, or one of considerable pressure from developing countries on the debt question and other such issues. Ultimately the subject concerns not just the big investors—the big banks—but the small-league investors: the wage and salary earners making monthly payments to a mortgage account or pension fund, or weekly payments into a building society.

That brings me to the second provision, on the co-ordination of the laws, regulations and administrative provisions relating to the taking up and pursuit of credit institutions, and the amending directive before the House.

The provision suggested by the Commission is potentially very powerful. First, I believe that it gives the power, in essence, to block authorisation of the takeover or establishment of a financial institution by a company from a non-EC country. If the Minister believes otherwise, I should be glad to hear his views on that point.

The useful Treasury briefing paper on the matter says that, as drafted, the provisions would appear to prevent further subsidiarisation or takeovers by third country banks even when they are already established in the EC. Perhaps the Minister will clarify whether that is the Government's interpretation of the provisions.

Some people are understandably concerned. As ever, we are grateful to the Select Committee on European Legislation for giving some information about other people's views. My original understanding was that the briefing came from the Treasury Select Committee, perhaps because of the difference between the in-depth analysis from the Treasury Select Committee and the briefing documents relating to this regulation.

The third report of the Select Committee on European Legislation has a very brief summary of a submission made by the American Banking and Securities Association of London, expressing its concern on reciprocity, and a submission by the Bank of Tokyo Ltd., which welcomes the move but is very concerned about the reciprocity conditions.

It is clear that if the provision is passed there could be constraints on banks such as Namura, which has perhaps £30 billion of assets in the latest figures I have seen, extending their operations in the European Community.

I would not share, nor do the Opposition share, the Minister's attitude towards this, or the sort of observations he made about the Uruguay round of talks. Let us not be naive about this. In the Uruguay round, the United States has chosen to insert into all those negotiations intellectual property rights, which should not normally come within the GATT procedures. In other words, the United States wants access to Latin American countries and others for patents and licences of United States companies, with a comparative technological advantage in relation to Latin America.

We should have a much fuller debate on the open question of what role Europe should take in relation to foreign investment and/or takeovers of its financial services sector by other financial institutions based in other countries. That is so not least as the Japanese in particular have built up such a massive structural surplus in their visible trade and are seeking outlets for it. They have been creating financial institutions in the past 15 to 20 years so that they are now the leaders in financial operations, including credit institutions and insurance, on the world markets.

I should like to deal with the provisions for disclosure of anyone holding more than 10 per cent. of the capital or voting rights in a company. I do not recall that the Minister addressed his remarks to that issue. This should be debated in detail and considered seriously. Many people would regard it as a worthwhile move that nobody should be able to hold more than 10 per cent. without that matter becoming transparent. But evasion in these matters is notorious, through nominee holdings in financial institutions.

Mr. Hugh Dykes (Harrow, East)

I am puzzled, because the hon. Gentleman does not seem to be talking about the documents before the House. Since he and I sponsored the early-day motion, if he had been able to make those free telephone calls to Brussels, and speak to officials there, presumably he would have been able to find out what the documents were about.

Mr. Holland

I am glad to give the hon. Gentleman the opportunity to raise so important a matter as right hon. and hon. Members having the advantage that even an executive officer in the Treasury may enjoy, of telephoning someone to clarify a particular point. The hon. Gentleman raises an important issue. If any right hon. or hon. Member, other than those on the Government Benches, were to seek the views of members of the Bundestag or of the Assemblee Nationale on the measures, they could do so only at their own expense. Those of us having inner-London seats who do not enjoy the additional cost allowance find that difficult to do.

The point I make is raised in the explanatory memorandum from the Treasury. In that sense, it is either directly relevant, or we are not getting a decent brief from the Treasury. I do not wish to impugn people who cannot answer for themselves—unless the Minister himself claims responsibility for the words in question. In taking that responsibility, perhaps the Minister will say what his views are on the provision.

Our view is that the provision is worth while but easy to evade by using nominee holdings, and so on. What consideration has been given to those aspects by the British and other Governments, in relation to other Governments, to ensure that transparency can be achieved in respect of the Community's financial institutions? It is nothing less than that point which we address tonight.

Given the transparency insistence of articles 85 and 86 of the treaty, how relevant are they considered to be in relation to the provisions for harmonising conditions for the operation of finance capital in the Community from 1992 onwards? What transparency do the Government or the Commission seek to achieve? One of the problems arising from the concentration of financial institutions in western Europe is that the speculative operations of leading banks or the foreign exchange departments of manufacturing firms—one is speaking not only of financial institutions—in hedging, and in the leading and lagging of payments, can force a currency that is under pressure to depreciate further when the Government do not wish that to happen.

Inversely, and as the Germans know very well, those practices can force a stronger currency into even further revaluation when the Government may not need it. It is on those aspects that we want a Government response. They are aspects that relate to monetary policy and monetary management in a wider sense. Nothing in the provisions or in the Minister's comments suggests that those issues have been addressed.

The European Parliament amendment, for example—which I understand will be accepted—suggests that, pending translation of the directives into international legislation, the specific accounting techniques used should be left to member states. What accounting techniques will be adopted in the final proposals? On what will they be based? It may be a fine, sensible and pragmatic measure, but when will the House have an opportunity to examine the accounting proposals? As any accountant will agree, accounting is not just a technical matter but the basis of accountability. The institutions' accountability is of the first importance in a Community that has wider objectives than simply serving the interests of the institutions themselves.

There is also the question of the relationship between the proposals and economic union. I was interested to hear the Minister's remarks, but their meaning was not entirely clear. Is he arguing that this is harmonisation or that it is not harmonisation?

Mr. Tim Smith

I am astonished that the hon. Member did not understand what my hon. Friend was saying. My hon. Friend made it absolutely clear at the beginning of his speech that this was a measure of deregulation and not a measure of harmonisation.

Mr. Holland

I am very glad, although perhaps the Economic Secretary would like to confirm that. His confirmation would be very useful.

Mr. Lilley

We have always known that the hon. Member has difficulty understanding things, but I do not think that any hon. Member on this side or any of the hon. Gentleman's hon. Friends has the least doubt that what I said was exactly as has been so succinctly summarised by my hon. Friend the Member for Beaconsfield (Mr. Smith)

Mr. Holland

Allegations about what one understands or does not understand are fine at this time of the night. B y all means let us have more of them, and perhaps we can get further from the subject.

The point is precisely that, by our interpretation, these are measures for harmonisation. I really do not understand why the Minister says that they are not. What is he going to say, for example, about the 8 per cent. reserve limit? Is he going to say simply that that is the minimum limit, that anybody can have any higher reserve he wishes? If so, what is he going to say about the provisions for third parties from other countries establishing or taking over financial institutions in the Community? Is it up to any member state to do what it wants? That is not what is in the proposals before us.

Mr. Lilley

Perhaps I can enlighten the hon. Member on that point. The provisions to which he refers fall under the reciprocity rule, about which I made my views very clear.

Mr. Holland

I do not want to suggest that the Minister is misleading the House, but I must say that by any normal standards these provisions are for harmonisation. We have the benefit of the Treasury's own briefing on the matter. At the moment, it appears that if any party from a non-member country wishes to set up a financial institution in the Community it can do so and thereby gain access to the rest of the Community market.

It is also clear from the provisions we now have that from 1 January 1993, this procedure could be blocked by any other Government not actually approving the establishment of the financial institution. The Treasury briefing says that authorisation could be delayed indefinitely by the failure to reach a consensus view. If that. is not a harmonised policy, what is? Or are we to consider that these briefings, for which, after all, the Minister has said he is responsible, are not relevant? We are not talking simply about clearing the playing field and having equal opportunity for competition; we are talking about harmonisation of the terms and conditions on which non-Community finance capital can operate in the Community.

In effect, these provisions fall within what is still widely recognised as an analytic and policy framework of negative integration. Basically, they are breaking down barriers to the free movement of capital and are not matched by measures for positive co-operation between Governments to build up from below rather than to harmonise down. What we need, in European financial terms, is the matching of a harmonised market for private finance with the capacity of Governments both to monitor such flows better, with better information, and to ensure a joint management of monetary policy in the Community itself. That, of course, is the bottom line, about which the Government are not clear what they want to do. In other words, they are proposing, in effect, to harmonise financial provisions in the Community at the private sector level without being at all decided on whether or not they actually want to join the exchange rate mechanism of the EMS.

Finally, I want to make an observation about the manner in which these proposals have been formulated and how they have been considered by this House. I am glad that they have been considered on the Floor of the House. Nonetheless, in terms of questions put to the Minister, I had to treat this virtually as a Committee stage because so much is unclear about the proposals and their implications. [Interruption.] No, it is not a superficial point, although I realise that Ministers would prefer to be in bed.

There are many unanswered questions in relation to the proposals. Arguably, the documents—which will affect the way in which financial markets will operate for all member states—are as important as any Finance Bill considered in Committee or on the Floor of the House. Yet in this case the Select Committee has given us the views of a handful of interested parties on a couple of pages. These measures deserve proper scrutiny, yet we have been given only an hour and a half to consider them, when most hon. Members have already gone home.

The Europe of 1992 as it is popularly known—1 January 1992 is not the key date except in respect of some of these documents; what is important is what is achieved before 1992—will be created, but it will be created less with a bang than with a whimper. That whimper is hardly even being heard in this House, and it is being heard in only a few circles outside it.

10.50 pm
Mr. Ian Taylor (Esher)

As the hon. Member for Vauxhall (Mr. Holland) said, this important debate takes place late on Thursday evening, when speaking on any motion, let alone a motion to take note of European Community documents, is unpopular.

There is a vital role throughout the EC for the banking and financial services, which represent about 7 per cent. of the Community's gross national product and provide about 3 million jobs. Therefore, any potential directive is important to many people, and not least to the treasuries of the member countries, which are concerned with the flow of invisible earnings. It is because the London market is the most important market in the EC in that respect that the House should be particularly concerned with the contents of the documents. It is because invisible earnings are so vital to this country that hon. Members are in the process of forming an all-party committee to consider them. I hope that that will improve our debates on this very important subject.

The banking and building society industries represent a problem within the EC single market because there has to be regulatory control somewhere. This time—perhaps one might say "for once"—the Commission has done exceedingly well in its recommendation. This time it has not centralised regulation in some new central bureaucracy but instead has adopted the principle of mutual recognition of regulatory systems in individual member countries. In other words, in this case the single banking licence represents the minimum harmonisation based on home country, not Brussels, control. It is a commendable move with wide implications in the Community.

Mr. Fitchew, the director-general of DG 15 in Brussels, commented in September 1988: The Commission has neither the capacity nor the wish in current circumstances to become responsible for the authorisation and supervision of banks and insurance companies throughout the Community. That is very good news, and very sensible. I wish that the directors-general of certain other DG groups would take note.

Mr. Fitchew continued: The host country, as the issuer of licences, would be incompatible with the idea of a single market because it would leave the host countries free to continue imposing all the barriers and restrictions on market access which we want to remove. So the only solution compatible with a single licence and a single market is home country control. I can only say a profound "Hear, hear" to that. I hope that those in Brussels are taking note. The Commission is suggesting opening up a further aspect of the European Community to competition. I was very glad that my hon. Friend the Economic Secretary drew attention to that. There has to be competition between companies and institutions, but how much more successful the Community will be if there is also competition between regulatory systems within the Community, highlighting contrasts between Governments and between the various industrial and financial organisations such as the banking systems.

I agree with my hon. Friend the Economic Secretary that competition in regulations does not necessarily mean that the ultimate winners will be those with the least protection for the consumer. Given the advertising and public inspection of the services provided by institutions, "caveat emptor" is increasingly the order of the day. Therefore companies which trade out of countries which are known to have a strong regulatory system will do very well throughout the Community compared with companies trading out of countries which may not have reached a reasonable standard. Obviously we must pay attention, and I am glad to note that the European Community is maintaining some supervision to ensure that there is no exaggerated competition in deregulation, but that ultimately the market will work intelligently and banking institutions in Britian will not suffer because of our very strong statutory self-regulatory system. I endorse the words of my right hon. Friend the Economic Secretary about the European Community draft directives on bank capital and solvency which play an integral part in the minimum regulations.

The host countries have some control over advertising and marketing rules. The drafts of the banking directive contain a clear implication that the host country's powers in terms of monetary responsibility and other aspects related to the Consumer Credit Act 1974 would not be impinged. There is an overriding interest in the public good. That will be welcomed by people in Britain who will be pleased that we have a way of preventing institutions with dubious techniques from trading within the City.

Major questions remain about reciprocity. There have been justifications for reciprocity and there are different ways in which it can be used. As Professor Curzon Price stated in a recent Institute of Economic Affairs pamphlet, reciprocity of opportunity is preferable. However, I believe ultimately that even this is bound to be used in a protectionist manner. I endorse my hon. Friend the Economic Secretary's comments about the danger of reciprocity being used as a tool on the GATT and Uruguay rounds. It is almost inevitable that it will end up enforcing the views of the outside world that we are attempting to erect a fence around Europe and create a fortress Europe.

However, in the draft documents before us, the reciprocity provisions are a good deal weaker than those put forward some five months ago by Commissioner de Clercq who was talking about a fierce form of protectionism that now appears to have been dropped. The House must recognise that London would suffer disproportionately if virtually any reciprocity arrangements remained in the final directive.

We will endorse the Minister's statement that he will put a very strong case for the removal of such provisions. If there is a difliculty obtaining that, the only solution that could be acceptable to Britain is for London to be able to accept any bank's subsidiary from a non-EEC country and for the Commission to withold a licence pending its own clearance procedure to prevent that bank then trading through a further branch or subsidiary in any other European country.

I urge my hon. Friend the Economic Secretary to consider that closely. Bearing in mind majority voting in the EC, it is sometimes useful to be armed with a positive idea that enshrines a principle but nevertheless protects our national interests. There are occasions when the Government—at least from what they reveal publicly—do not note that point. If one absolutely rejects something that will eventually be decided by majority voting, one may not be negotiating in the right frame of mind to win colleagues to one's point of view.

Mr. Dykes

What policy has my hon. Friend in mind?

Mr. Taylor

The policy of least resistance. I have advanced a view on reciprocity, but if my hon. Friend is talking of other policies, we may need to have further discussion on the witholding tax idea currently being proposed by the Commission, which may cause less damage to the City than has been implied.

We must be careful to ensure that the timing of the investment services directive is co-ordinated with the banking directives. They are being discussed at different times but they must be enacted at the same time because severe damage could be done to banking institutions that have securities business vis-a-vis those that are pure securities houses. The fair trade aspect of this must be carefully considered. I understand that the Commission has it in mind, but I urge my hon. Friend the Economic Secretary to keep his eye on it.

The banking directive and other related documents are much needed as it has been agreed within the Community progressively to abolish exchange controls. There will, therefore, be flows of capital between member countries. The fact that the Commission, instead of erecting new bureaucracy to deal with it, has adopted the minimum harmonisation, adopting the home country and mutual recognition principles, bodes well for the way that it will approach other matters resulting from exchange control deregulation.

11.2 pm

Mr. Nigel Spearing (Newham, South)

As the House knows, the Select Committee on European Legislation, which is commonly known as the Scrutiny Committee, has been considering various documents relating to this subject over the past year. My initial remarks are related to the quality of scrutiny that we are able to give the documents and the way in which we can help the House in this most important debate.

I say "most important" because I fancy that in three or four years' time somebody trying to discover why certain things are happening will refer to this debate and read it with some concern. I recall that in 1974 I attended a debate even more thinly attended than this, when the House unknowingly amended the treaty of Rome. It was not on the Order Paper; it was not mentioned on the statutory instruments that we were considering. It was buried in 700 pages of one of the treaties that we were designating a Community treaty. I hope that the results of this debate will not be so drastic, but nevertheless we do not know.

The Scrutiny Committee has issued no fewer than 10 reports since November 1986 on the documents that we are considering. In addition to the reports, with which the House has been efficiently furnished by the Deliverer of the Vote, we have five memoranda from the Treasury—not to mention the four texts, adding up to 100 pages of future statute.

I hope to take the hon. Member for Harrow, East (Mr. Dykes) with me when I say that the Scrutiny Committee does not have the power to consolidate the 10 reports that we have made on the documents. We can only report on each document, amendment and issue as it comes up. The House has not given us the power to consolidate. Even if we had it, I could not promise that we would be able to consolidate reports, although it is likely that we would, because most of the basic work would have been done on the documents as they came into our possession. Had we had these powers, we could have provided the House with a much better guide.

At least two years ago the Committee reported that it would like an adjustment to its terms of reference to enable it to fulfil the sort of tasks that I have mentioned—

Mr. Dykes

The hon. Gentleman is well known for his fair approach to these matters as Chairman of the Scrutiny Committee, despite other views that he may hold about the EEC, and he is held in tremendous respect by hon Members on all sides of the House for the immense amount of work that he does.

Is the hon. Gentleman implying that it would be useful if Government motions on these subjects referred to the contents of the report that applied to the debate? Of course, the Committee only recommends a subject for debate; it does not go into its merits. Should Government motions refer to the subsequent report on the implications of the matters under discussion?

Mr. Spearing

I am grateful to the hon. Gentleman for his comments. The Government can table whatever motions they like, and hon. Members can table amendments to them. Sometimes references to procedure or to the Committee's reports can be included in motions and amendments. That would not be out of order, but it would depend on the circumstances and not on a change in the terms of reference. It can already be done—yet we cannot help the House by providing it with a consolidated report on these technical matters.

I speak here not as Chairman of the Scrutiny Committee but as the hon. Member for Newham, South. I do not claim to be an expert in banking. I contribute to pension funds, and like many people I have a bank account. Occasionally, we borrow money. We are told that one of the curses of our day is the amount of indebtedness into which people have fallen. This debate has to do with credit institutions in general. Sometimes they are politely called banks, sometimes credit houses, sometimes money lenders. Hon. Members will know from listening in their surgeries of the problems associated with the lack of credit controls, now and in the past.

Mr. Wells

I want to take up the hon. Gentleman's point about our being able to amend the Government motion. The motion is That this House takes note of European Community documents", and so on. We cannot amend a take note motion or direct the Minister on how he should vote when he discusses this matter in the Council.

Mr. Spearing

I would not make a procedural ruling. That would be up to you, Mr. Deputy Speaker. I can tell the hon. Gentleman only of my experience. Ten years ago I literally sat where he is sitting. The hon. Member for Harrow, East will confirm that I and my hon. Friends frequently tabled amendments to our Government's motions on this sort of subject. On one occasion we sought to delete the words "take note" and insert "disapprove" and to add some words. Whether such amendments are selected is a matter for the Chair, but between 1974 and 1979 such amendments were frequently selected, debated and voted on, and, on occasions, Her Majesty's Government accepted them.

Therefore, I see no reason why amendments should not be tabled and, if proper, selected, and, if necessary, moved and voted on. Unless the House does that on EEC matters and is shown to be alive to its opportunities, the House is not using its scrutiny opportunities properly. A debate on the amendment, even if it is withdrawn, can sometimes pinpoint a weakness or particular aspect of the matter in hand which is for the illumination of all.

So far, much of the debate has been about reciprocity, which I shall come to, but let me continue with a not very controversial comment about credit, which I was about to make when the hon. Member for Hertford and Stortford (Mr. Wells) intervened. There was a document in the early 1970s, which became well known after its results became apparent, called "Competition and credit control". Purely as an amateur—hon. Members will correct me if I am wrong—I would say that that document changed the Bank of England's attitude to the control of credit institutions and changed the nature of the banks. We all know that subsequently there was a property boom, some property scandals and the lifeboat, and Britain's economy took quite a knock, which, unfortunately, coincided with the oil price increase. Britain's economy was gravely influenced thereby.

Lord Barber was the Chancellor of the Exchequer at that time and it was up to Her Majesty's Government to encourage or restrain the then Governor of the Bank of England in respect of that document. Although there is some option in regulation, I take it that the nature of credit control and the measure of stimulation or restriction of competition is, to some extent, not in the hands of Her Majesty's Government in the same way as it was then.

We do not know about the central European banks. Mr. Delors's committee may make great suggestions, or there might be an informal committee based in Basle with the Bundesbank to the fore, which may exude influence over the climate of credit control even if there are no formal statutory powers in the regulations. Therefore, there may be a risk of the sort of influence that was or was not exercised by Her Majesty's Government in that unhappy period of our national finances not just being repeated but being beyond the control of the House or even of a strong majority Government. I put that to the Minister because I am not sufficiently expert to provide the answer, which is important.

Let me deal now with scrutiny, and, perhaps putting back on that label of which I spoke, draw attention to some of the points to which my hon. Friend the Member for Vauxhall (Mr. Holland) referred, which give me some cause for anxiety.

There is a Treasury memorandum dated 24 March 1978, signed by the Economic Secretary, relating to document 4794/88, which says in its heading: the Co-ordination of the laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of credit institutions". Paragraph 13 relates to authorisation. It says: authorisation could be delayed indefinitely by the failure to reach a consensus view on whether it had or had not been achieved. The nature and scope of the measures which the Commission may propose to secure reciprocity are not defined or constrained in the directive; and the procedures do not appear to have been fully thought through. Paragraph 15 is entitled Impact on United Kingdom law". It says: As currently drafted, the directive would require changes to the Banking Act 1987, the Financial Services Act 1986 and possibly the Building Societies Act 1986. Some can be made by secondary legislation, others not but further detailed scrutiny will be needed to establish the full implications. It is not detailed scrutiny to decide the detailed amendment, but it says: detailed scrutiny will be needed to establish the full implications. The Economic Secretary may correct me, but I am not aware of a further explanatory memorandum, which goes into those detailed implications. I believe that the fact that that was written at all is important.

Paragraph 18 says: The restrictions on third country banks were introduced at a very late stage, and without prior discussion in the Commission working groups or with the Banking Advisory Committee. These raise substantial issues of principle and practicalities which will have to be considered… fully and discussed in detail with other Member States, but the Commission's proposals are unacceptable… and almost certainly unworkable as drafted. Those are important qualifications, even though, as a non-technical banking person, I do not know their full impact. We repeated some of those sentences in our report HC 43-xx 1987–88.

We included in our last report, HC 15-iii of 7 December, some of the evidence that we received from interested bodies. The British Bankers Association, again on a matter of reciprocity, said: The Association comments that this goes too far in inhibiting legitimate transactions, and may be incompatible with GATT obligations, but it concedes that there is a dilemma. Of course, it is a matter of dilemma for London, with its world links as well as links with the Community. I have no brief for the Bank of Tokyo—I am not sure whether its activities in this country are beneficial or not—but the report says: the procedures to be applied to acquisitions and participation in Community institutions by third country banks could lead to 'unnecessary delay in transactions and place unfair restrictions on non-Community banks'". I might be in favour of what they say are unfair restrictions, but I do not know. Our closing summary, however, says this: In the light of the evidence it has now received, and the suggestions that the reciprocity provisions relating to third country banks wishing to establish or acquire banks in the Community could have a damaging effect on London as a whole financial centre, the Community recommends further consideration of the draft Directive by the House". That is what we are doing.

It may be that for political reasons, which hon. Members will understand, I do not mind that this directive has an adverse impact on London as a world financial centre. I am not as great an enthusiast for that as some Conservative Members. But that is not the point of the debate. We are debating, or attempting to debate, the legal and political impact of these documents on the future financial mechanisms of our country. Whether or not we like those financial mechanisms, we are attempting to grapple with the effect of adopting the motion unamended. I do not know the answer. So far, I have heard nothing tonight that helps me to get the answer. If nothing else, we do not know what the eventual outcome will be.

The hon. Member for Hertford and Stortford asked the Economic Secretary whether the measure is subject to a majority or unanimous vote. Of course, the memoranda tell us, quite properly, that it is subject to a qualified majority. Some of the problems to which the Economic Secretary referred in his opening remarks may remain. More problems could be added. I have no idea what other nations think. It might be said that, if our fears are correct, the interests of the City of London might be prejudiced. I do not know which countries may be considered favourable. I suppose that some countries would not mind if they were. We just do not know. Even if the measure is accepted unamended, we do not know the effects. Of course, it can he amended at a later stage or changed by a vote of the Council of Ministers. A common position has not been reached.

I have grave doubts about whether the House has sufficient information and has been able, with the documents placed before it, to understand the implications of the proposals, still less to assess what they will be by the time they are adopted by the Council of Ministers and appear as laws of this land in the official journal of the Community.

Mr. Dykes

The hon. Gentleman should not get too carried away with the lugubrious, pessimistic view about our not being able to scrutinise. We all would like more time. The hon. Gentleman and I would like more European Supply days, and so on. The Banking Act 1987 was before the House, as a result of the Johnson Matthey collapse and the abolition of such things as Ltds and banks proper. How many hon. Members on the Floor of the House and in Committee took an interest in the subject? They were doing it on behalf of the whole House. The same applies to this type of legislation, which is developing in an evolutionary way. Perhaps the hon. Gentleman finds that more difficult to absorb and understand.

Mr. Spearing

I understand what the hon. Gentleman says. The Banking Act was a British domestic Act, and it was subsequently amended. I take his point that it may not have received proper scrutiny by ourselves or by our colleagues. All that I am pointing out is that there could have been some improvements in the proceedure that would have enabled tonight's debate to be a little more effective. I hope that the hon. Gentleman will agree that those suggestions were constructive.

Mr. Wells

Does the hon. Gentleman support the Economic Secretary's argument that the present proposals, particularly on recognising third country banks and reciprocity, are unacceptable not only to Conservative Members but to himself? Will the hon. Gentleman back the Economic Secretary, so that the Economic Secretary may refer to that when he presents his arguments to the Council of Ministers?

Mr. Spearing

I am grateful to the hon. Gentleman. Despite the fact that I said that I was not speaking with a label on, I would not, and cannot, commit Opposition Members. That is the task of my hon. Friend the Member for Vauxhall who led the debate for the Opposition. I do not have the technical knowledge with which to make a technical assessment of that point. Therefore, I regret that I cannot accede to the hon. Gentleman's request.

11.24 pm
Mr. William Cash (Stafford)

Among other things, the motion states that we should support the Government's intention to ensure that the Commission's action in this field takes full account of United Kingdom interests. I commend the Economic Secretary and the officials in his Department for their hard work in attempting manfully to deal with some very intractable problems. The plain truth is that the Commission seems to be dead set on these reciprocity provisions.

I raised earlier in an intervention the question of what is going to happen in the outcome. There is a possibility that, at the end of the day, this directive simply will not go through because the Council of Ministers will dig in its heels and refuse to accept the proposals of the Commission. But I do not think that is really likely to happen.

What I am concerned about is the fact that, despite the numerous reports of the members of the Select Committee on European Legislation and despite the insistence of different Government officials in different member states, the Commission is obdurate on this question, although it is quite clear that it will cause very serious difficulties, not only for the United Kingdom but also, apparently, for the other member states.

One is bound to ask what the Commission represents if it does not represent an interest reflecting the combined views of the member states themselves. I believe that the members of the Commission must start taking note of the views expressed by member states not only in camera within the working groups and COREPER—the Committee of Permanent Representatives—but in the parliamentary institutions, as they are being expressed here today.

This brings me to my second point—the manner in which we scrutinise this legislation. I do not want to labour the point that has already been made, but at a conference I attended recently in Berlin which was addressed by Emilio Colombo, this was described by the ex-Prime Minister of Italy as the most important directive, in his personal opinion, to go through the European Community institutions since the treaty of Rome, because at the root of it is the whole question of capital movements and liberalisation of finances throughout the Community.

It really is not good enough for us to be discussing a matter of this importance at 11.30 on a Thursday evening. In my judgment, and I believe in the judgment of many other hon. Members, it should be discussed in prime time, and we should be given an opportunity to consider it properly.

Reference has been made to the Banking Act 1987. I happened to sit on the Committee on that Bill and I can assure the hon. Member for Newham, South (Mr. Spearing) that it was considered very carefully and thoroughly by the Committee. The Economic Secretary, in another incarnation, was sitting just along the Bench from me, and I am sure that he will back me up. Furthermore, amendments were made, with the co-operation of Government Back Benchers, to ensure that we had adequate protection for British banks from our predators abroad.

The reciprocity provisions in this directive are very different from what we were considering in the Banking Bill as it applied specifically to the United Kingdom. The Commission really must be given some very firm instructions—I repeat, "instructions"—by the national Parliaments and by the Council of Ministers. It must be told that we are simply not going to be pushed into accepting provisions which lead, for example, the American Banking and Securities Association of London to say the following with regard to this proposal: The Association is therefore extremely disappointed that the Commission is souring the opportunity to create a free market by insisting on a single, uniform reciprocity clause to determine who may access the European market. It states that European financial markets are very demanding and competitive and domestic firms are growing in strength daily… The Association states that many American firms have chosen London as their headquarters for European activities and London therefore stands to lose the most investment as a result of reciprocity problems.

Mr. Holland

The hon. Gentleman has called for the Government to instruct the Commission. He must be aware that by treaty the Government cannot instruct the Commission. The Commission formulates proposals which are accepted, rejected or amended subject to the qualifications of the Single European Act. This is precisely the constitutional question and problem about which many hon. Members expressed concern a long time ago. Governments cannot jointly put forward proposals for amendments to the Assembly. This is not only one of the most important issues about the Community before the House, but one of the most important constitutional issues.

While the hon. Gentleman is so concerned to endorse the views of the American bankers, surely he realises that in a large market those banks are going to get in one way or another. Much of the concern that has been generated is not for real.

Mr. Cash

I am delighted that the hon. Gentleman noted that I used the word "instruction" because I wanted to seize on that constitutional question. I believe that the procedures available to the Council of Ministers can be used, because they have the ultimate say, to tell the Commission that if it persists in taking such a steadfast line and is so obdurate, at the end of the day, the Council of Ministers will refuse to accept the proposals. Therefore, there would be a trade-off.

I also believe that British interests should be protected and that is why I wanted to refer to the point made by the American banking association. We must look after the interests of the United Kingdom in this House. When the Minister returns to the Commission, he will know that in taking note of this proposal we want to ensure that the Government's intention to look after British interests will be properly and effectively safeguarded.

11.32 pm
Mr. Bowen Wells (Hertford and Stortford)

I welcome the fact that the directive is being discussed in this take note motion at this early stage before a common position has been reached in the Council of Ministers and before the matter has been discussed in the European Parliament. It is very important that we should understand what our Ministers are having to grapple with in the Council of Ministers and to show our support, or lack of it, for the policy that they are following.

Unfortunately, most hon. Members have not had sufficient briefing or time to consider the matter. It is strange that, apart from the report from the Select Committee on European Legislation which went out for evidence which is before the House, no banks that I am aware of have briefed hon. Members for the debate tonight. Building societies and banks must support the House to assist hon. Members to understand the legislation that is going through Europe and so help us to form a view which will assist the Minister when he is debating in the Council.

I agree with the points that were made so well by my hon. Friend the Member for Esher (Mr. Taylor) about the stand that the Minister is proposing to take, I hope with the majority of our colleagues on the Council of Ministers, in respect of the reciprocity clauses. Clearly those proposals would be particularly damaging to British banking, and damaging to Europe as a banking centre. I urge my hon. Friend the Minister to ensure that the Commission does not adopt those proposals.

I invite my hon. Friend to say a little about how the discussions on the draft directive on own funds are progressing in Europe. Equally, I hope that he will tell us how the discussions are going on the draft directive on harmonised solvency ratios. Those directives must clearly be read in association with the directive that we are considering tonight. Will the Minister return to the House, after matters have progressed further, so that we can consider these issues before an agreement is reached?

11.34 pm
Mr. Lilley

This has been an interesting and valuable debate. I paid tribute to the Select Committee on European Legislation before its distinguished Chairman, the hon. Member for Newham, South (Mr. Spearing) entered the Chamber. I repeat that tribute in the light of his remarks. I will endeavour to respond to the points that hon. Members made in the debate.

The hon. Member for Vauxhall (Mr. Holland) indicated that there had been difficulties of communication in the course of the debate. I failed to explain clearly to him the points that I was endeavouring to make, and I failed also to understand the questions that he was asking me. None the less, I will do my best to answer them. I suppose there was at least reciprocity between us on that front.

The hon. Gentleman raised the specific question whether reciprocity applied to takeovers by third countries of banks owned within the Community. The answer is that, as the directive is drafted, it would require the implementation of the reciprocity procedures in such cases. He also asked us to take into account potential changes in the American Federal Reserve system. That goes beyond the scope not merely of the debate but of the powers of the Community.

Mr. Holland


Mr. Lilley

I will give way in a second, but what I am about to say may answer the hon. Gentleman's point. I said that it was important that the solvency and capital adequacy criteria incorporated in the directive should reflect and be compatible with international standards. Among those agreeing to the standards will be the United States, as well as Japan and other major financial countries. That has already been worked out within the ambit of the Basle agreement. It would be sensible to build on that.

Mr. Holland

My point was not there there are prospective changes forthcoming in the United States Fed, but rather that the proposed "European central bank" may well appear, we are told, in a form with powers comparable to those which the Fed had until the 1930s and the New Deal. The point that I was making was that those powers were insufficient to address the problem of insolvency in United States banks at the time or to remedy the crisis.

Mr. Lilley

I do not think that there are any plans to model the European financial system on the pre-slump American financial system. Should any be presented by the Commission, we shall notify the House and perhaps discuss them at another date.

The hon. Gentleman also raised the question of accountancy standards. There is another directive dealing specifically with that matter, which will come into effect in 1993. It will set common accountancy standards for banks. I believe that it is broadly satisfactory and has met with little criticism.

My hon. Friend the Member for Esher (Mr. Taylor) gave welcome support to the principles that I enunciated and that lie behind the basic framework of the three directives. I am grateful to him for his support. He recognised that the directives are based on the principle of mutual recognition of home country control. That is a valuable principle with application probably to other sectors beyond banking and financial services.

My hon. Friend also made an interesting proposal which will merit study. I shall read with interest the report of the debate.

The hon. Member for Newham, South raised a number of questions about the manner in which we consider important measures like this and the substance of the measures themselves. He asked whether another explanatory memorandum had been or should be presented to the House since the one which I presented in March 1988. 1 agree with him that the original memorandum stated that further work was required; since then, however, the Commission has itself agreed to reconsider the reciprocity provisions in that memorandum. There would clearly be little point in giving more explication of the meaning of the existing provision before any further thought is brought to the attention of member states and thereby immediately to the House's attention, as a result of reconsideration by the Commission.

We do not know what the final legislation will be like, but we must make a judgment in the House about the point at which we debate it. I think that, in general, it is preferable to debate earlier rather than later, and I welcome the fact that we are debating this issue tonight.

We heard an interesting contribution from my hon. Friend the Member for Stafford (Mr. Cash), who reinforced concerns that I had expressed about reciprocity. I am grateful to him for that. He also made the important point that the Commission must listen not just to the voices of Government but to voices heard in national Parliaments in the course of debates such as this. He quoted Mr. Amato as saying that this was the most important set of directives since either the Single European Act or legislation made under it, and I agree that it is extremely important. It is important in itself and particularly important to the United Kingdom, because it affects an industry that is very significant for employment, and not just in London. We often refer to the City of London, but we forget that the industry is also the biggest in Scotland, and that we have in the United Kingdom not one but two major financial centres—the two most important in Europe—and that the industry employs people throughout the country.

My hon. Friend also mentioned the concern expressed by American banks and the American chamber of commerce, and by other countries, about the impact of reciprocity on their banks already established in this country, or wishing to become so. That is an important and genuine concern, to which I hope the Commission will listen. Although it is right and proper that each member state in the Community as a whole should put self-interest first, we must recognise that our self-interest is always best served by our working together in an open and free-trading framework, not a protectionist and restrictive one.

My hon. Friend the Member for Hertford and Stortford (Mr. Wells) re-emphasised the importance of pressing hard on the reciprocity issue, and I can assure him that we shall continue to do so. We are grateful for the backing that the debate has given the British Government's position in the discussions which will continue in Europe.

The Cecchini report, which endeavours to quantify the benefits to member states in the Community as a whole from the various measures to create the single market, makes it clear that in the sphere of banking—and the related sphere of financial services that will follow from it—there is a priori evidence that restrictions exist on trade between member states, and that Britain is potentially one of the greatest gainers when those restrictions are removed. It appears on all the evidence that we have not only the largest but one of the most efficient and lowest-cost industries in most sectors of banking and financial services, and consequently stand to benefit when a single market has been created in which our banks and financial institutions can operate more freely and use their services to benefit consumers in other countries.

That is why we wholeheartedly support the underlying thrust of the directives, although we have some reservations about one major aspect—reciprocity—and important objectives to pursue in the negotiations. We want to ensure that the directives are introduced simultaneously with the investment services directive, and that the arrangements for subsequent implementation and amendment are satisfactory and allow the highest prudential standards to be maintained.

I hope that the House will support the motion and, in taking note of these documents, will back the Government in their negotiating position for the further negotiation of these valuable directives.

Question put:

The House divided: Ayes 73, Noes 10.

Division No. 89] [11.44 pm
Alison, Rt Hon Michael Bennett, Nicholas (Pembroke)
Amess, David Boswell, Tim
Arbuthnot, James Bottomley, Peter
Arnold, Jacques (Gravesham) Bowis, John
Atkinson, David Brooke, Rt Hon Peter
Batiste, Spencer Burns, Simon
Burt, Alistair Lightbown, David
Carlisle, Kenneth (Lincoln) Lilley, Peter
Carrington, Matthew Mans, Keith
Cash, William Maude, Hon Francis
Chapman, Sydney Meyer, Sir Anthony
Chope, Christopher Miller, Sir Hal
Coombs, Anthony (Wyre F'rest) Neubert, Michael
Coombs, Simon (Swindon) Nicholls, Patrick
Cope, Rt Hon John Nicholson, David (Taunton)
Davis, David (Boothferry) Paice, James
Day, Stephen Portillo, Michael
Dorrell, Stephen Shephard, Mrs G. (Norfolk SW)
Durant, Tony Stern, Michael
Dykes, Hugh Stevens, Lewis
Fallon, Michael Stradling Thomas, Sir John
Fenner, Dame Peggy Taylor, Ian (Esher)
Forth, Eric Taylor, John M (Solihull)
Freeman, Roger Thompson, Patrick (Norwich N)
French, Douglas Thorne, Neil
Garel-Jones, Tristan Trotter, Neville
Gregory, Conal Twinn, Dr Ian
Griffiths, Peter (Portsmouth N) Waddington, Rt Hon David
Hanley, Jeremy Walden, George
Hargreaves, Ken (Hyndburn) Warren, Kenneth
Heathcoat-Amory, David Wells, Bowen
Heseltine, Rt Hon Michael Wheeler, John
Hind, Kenneth Widdecombe, Ann
Howarth, G. (Cannock & B'wd) Wood, Timothy
Hunt, David (Wirral W)
Irvine, Michael Tellers for the Ayes:
Knapman, Roger Mr. Alan Howarth and
Lawrence, Ivan Mr. Tom Sackville.
Lee, John (Pendle)
Barnes, Harry (Derbyshire NE) Taylor, Mrs Ann (Dewsbury)
Cunliffe, Lawrence Welsh, Andrew (Angus E)
Dixon, Don Wise, Mrs Audrey
Gordon, Mildred
Haynes, Frank Tellers for the Noes:
Hughes, John (Coventry NE) Mr. Bob Cryer and
Pike, Peter L. Mr. Dennis Skinner.

Question accordingly agreed to.


That this House takes note of European Community Documents Nos. 4794/88 on credit institutions, 9224/86, 4339/88 and the Supplementary Explanatory Memorandum submitted by the Treasury on 22nd July 1988 on the Own Funds of credit institutions and 6033/88 on a solvency ratio for credit institutions; and supports the Government's intention to ensure that the Commission's action in this field takes full account of United Kingdom interests.

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