City Institutions (Hansard, 16 January 1992)

§ 9. Mr. Beaumont-Dark
To ask the Chancellor of the Exchequer if he has any plans to meet the Governor of the Bank of England to discuss the City institutions.

§ Mrs. Gillian Shephard
My right hon. Friend meets the Governor of the Bank of England frequently, and they discuss a wide range of issues.

§ Mr. Beaumont-Dark
Self-regulation in the City was meant to be a panacea which would solve most existing problems. Since then we have had Polly Peck, Brent Walker, the scandal of the Bank of Credit and Commerce International, and then the greatest scandal of all—the Maxwell scandal. As self-regulation is proving somewhat less than satisfactory, is it not time to consider establishing a Securities and Exchange Commission—an SEC—as exists in America?
The City of London is important to the invisible exports of this country, and we cannot allow scandals such as those that have happened in the past. Under self-regulation people tend to protect one another so that they do not get caught. Let us get things out in the open and have an SEC to ensure that the honour of the City of London is well protected by a statutory authority.

§ Mrs. Shephard
I hear what my hon. Friend says. We have certainly seen some large and spectacular frauds uncovered recently, although they were not all in financial institutions. Clearly, however, that does not mean that the City is riddled with fraud or that the regulatory system has failed. I am sure that my hon. Friend will agree that no system of regulation can ever give complete protection against a determined thief or fraudster. The Government have done more than any other Government to tighten the regulation of the City, through a series of powerful pieces of legislation. In the end, a balance has to be struck between tight regulation and cramping any sort of innovation or initiative in the financial services sector, as the Labour party would advocate.

§ Mr. Vaz
Could the Government be prevailed upon to persuade the City institutions to provide more positive assistance for depositors, creditors and former employees of the Bank of Credit and Commerce International? The Minister will know that former depositors will have problems getting facilities for mortgages. She knows, too, that representations have been made to the Chancellor of the Exchequer. Could the City institutions be made positively to assist people who, through no fault of theirs, have lost a considerable amount of money?

§ Mrs. Shephard
The hon. Gentleman will wish to know that that point is being pursued. He will also be aware that arrangements are in place for the liquidators to aid banks in their assessment of applications made by small businesses and personal customers for alternative facilities.

§ Sir Peter Tapsell
May I support what my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) has just said in urging the Government to give serious consideration to the establishment of a Securities and Exchange Commission in Britain. Is it not clear that the multiplicity of often overlapping self-regulating authorities are not adequately protecting the national interest? Will my hon. Friend the Minister bear it in mind 1090 that many of the frauds that have come to the attention of our regulating authorities were first discovered and reported to them by the American SEC?

§ Mrs. Shephard
Of course, that was not so in the case of BCCI. I repeat to my hon. Friend that, while there is cause for concern about the large spectacular frauds that have been uncovered, the Government have done more than any other with the Financial Services Act 1986, the Banking Act 1987, the Building Societies Act 1986 and amendments to the Companies Acts to regulate the City of London.

§ Mr. Salmond
In discussions with the Governor of the Bank of England on City institutions will the Chancellor discuss how to circumvent the damage done to hopes to locate the Eurobank in the United Kingdom by the Government's opt-out policy on the single currency? Will he further discuss whether it would be better to argue for Edinburgh as a location for the bank—a location much more acceptable to other Europeans than London, which the Labour and Tory Front-Bench teams have argued for?

§ Mrs. Shephard
No decision needs to be taken for some time on the location of the European central bank. The Government have made it clear that a decision on the site would be premature at this stage. Whatever happens, the Government will do what they can to advance the case of the most credible United Kingdom candidate.