§ 2. Mr. DykesTo ask the Secretary of State for Trade and Industry if he will outline the progress being made by his Department in negotiating the capital adequacy revised directive with our EC counterparts in the Trade and Industry Council.
§ The Minister for Corporate Affairs (Mr. John Redwood)In June 1990 the Commission tabled a proposal on capital adequacy. More recently, it tabled a position paper on equity risk and interest rate risk. We are negotiating on those proposals together. I am consulting widely with the industry concerned and we wish to see the principle established that capital should be related to the risks being run.
§ Mr. DykesI thank my hon. Friend for that answer and wish him well in the work on the revised draft text. Is he now confident that that will give a level playing field, a single-market basis and a fair opportunity for competition by British financial intermediaries?
§ Mr. RedwoodNo, I am not yet fully satisfied on that point. A number of issues relating to independent financial advisers still need to be discussed and brought to a satisfactory conclusion. I am pleased that the Commission is now a partner and is listening carefully to our argument that IFAs should be distinguished by the amount of risk being run, that different levels of capital should apply to them and that in some cases exemptions should apply to them. I should like to see rather more exemptions than are currently proposed, but getting agreement on that will obviously be difficult as it involves a qualified majority vote.
§ Mr. SkinnerWill the Minister tell his Common Market counterparts that in the jungle of the City of London it would be a good idea to learn some lessons from the 259 swindle at Harrods, the Blue Arrow fiasco and all the rest of the City frauds'? They will certainly not achieve a level playing field like that.
§ Mr. RedwoodIt is typical of the Opposition always to try to run down the City of London and this country's financial services. It is high time that the Opposition got behind those services and realised that they create hundreds of thousands of jobs and do a very good job for this country in Europe.
§ Mr. Michael IrvineDoes my hon. Friend agree that the proposed capital adequacy requirements as they stand, could all too easily restrict choice, reduce competition and thus damage the interests of the financial consumers whom they are intended to assist?
§ Mr. RedwoodI have already said that the United Kingdom Government wish to see capital related directly to risk. If we succeed in that, my hon. Friend's fears will be confounded. I accept his intention and that we still need to make more progress over the definition of categories for various types of independent financial adviser. One of my main objectives is to try to avoid independent financial advisers being squeezed by European directives.