HL Deb 25 May 1988 vol 497 cc896-7

2.55 p.m.

Lord Bruce-Gardyne asked Her Majesty's Government:

On what grounds they have withheld permission for Nomura and Daiwa to commence trading in London as gilt-edge market makers.

Lord Beaverbrook

My Lords, the question of access to gilt-edge market maker status is one of a number of issues which are being considered.

Lord Bruce-Gardyne

My Lords, I am very grateful to my noble friend for that reply. Even if one accepts—as I am sure that many of us do—that reciprocity is a perfectly reasonable instrument to use to secure access for British firms to overseas financial markets, is it not questionable in this instance whether it is entirely wise to make a monkey of the Bank of England's regulatory role since the Bank of England had already given clearance for those two Japanese firms to operate as market makers in the City of London?

Also, is it altogether practical to see the City of London operating as one of the world's three tripod markets in the global financial markets of the future without the presence of major Japanese operators?

Lord Beaverbrook

My Lords, taking my noble friend's second point first, I believe that major Japanese security houses such as Nomura and Daiwa are here in London for the long term. I believe that my noble friend may be reading too much into what he has read in newspapers about potential disagreements. The Bank of England, my department and the Treasury are fully in agreement on the importance of maintaining London's lead in the global markets and on working together to achieve access for British houses to financial markets in Japan and elsewhere.

Lord Marsh

My Lords, would the noble Lord not agree that in this matter we are far more vulnerable in London than the Japanese are in Tokyo? Does he also agree that to take sanctions against two of the world's biggest financial houses on an issue of this kind hardly increases confidence in London as a European financial centre?

Lord Beaverbrook

My Lords, that is an interesting view. We have to look to the Japanese to remove restrictions and perhaps sources of friction in a trading relationship which we are otherwise finding of increasing value.

The Earl of Eniskillen

My Lords, does the Minister really feel that this is the best way of doing it?

Lord Beaverbrook

Yes, my Lords.

Lord Bruce-Gardyne

My Lords, can my noble friend shed light on one further aspect of this matter? At the same time my honourable friend the Economic Secretary to the Treasury is saying that in no circumstances will Her Majesty's Government tolerate European Community rules for the application of reciprocity for access to financial markets. Surely there is a fundamental contradiction here which has to be resolved.

Lord Beaverbrook

My Lords, there is no question of the Government having implemented any reciprocity powers which they have been given by Parliament in the Financial Services Act. That is not the case at all.