HL Deb 19 March 1990 vol 517 cc5-8

2.49 p.m.

Lord Harris of Greenwich asked Her Majesty's Government:

What action the Bank of England proposes to take against the Bank of Credit and Commerce International following the conviction of its subsidiaries on charges of money laundering in the United States Federal Court in Florida.

The Paymaster General (The Earl of Caithness)

My Lords, the confidentiality requirements of Part V of the Banking Act 1987 prevent the Government from commenting on a general point relating to the Bank of England. Nevertheless, as a general point, the Bank can be expected to look very carefully at the outcome of any court proceedings involving an authorised institution.

Lord Harris of Greenwich

My Lords, I thank the noble Earl for that reply. Is he aware that the national drugs intelligence co-ordinator has estimated that drug traffickers in this country have assets of about £ 1,800 million? In the context of that situation, does he appreciate that there is substantial disquiet about this bank operating in the United Kingdom with a considerable number of branches? The bank has been convicted in the federal courts in the United States of laundering large sums of money on behalf of the Medellin drugs cartel. Is it not clear that in that situation it is necessary for the Bank of England to take early action to deal with this matter?

The Earl of Caithness

My Lords, there is a difference in law between the United Kingdom and the United States. In the United States, liability can be taken against a company as regards any of its employees who do something wrong. However, that is not the case in the United Kingdom. The noble Lord presses me to disclose information under Part V of the Banking Act. However, I know that he realises that Section 82 (3) (a) means that if I do so I could face a term of two years' imprisonment or a fine. Perhaps the noble Lord would like that, but I would not.

Lord Bruce of Donington

My Lords, while I express the wish of the whole House that the noble Earl should not find himself incarcerated, how does the question of confidentiality apply in this case? The facts of the case are known. A subsidiary of the bank has been convicted. Surely the Minister's general powers as regards giving directions to the Bank of England enable him to require at least that the Bank of England should inform the Government what action it proposes to take.

The Earl of Caithness

My Lords, I can do no more than draw the attention of the noble Lord to the wording of the Banking Act 1987. It is a decision for the Bank of England whether to revoke or to restrict the banking licence of an authorised institution. That is the power that Parliament gave the Bank of England.

Baroness Phillips

My Lords, whatever happened to parliamentary privilege if the Minister cannot reveal something in this House?

The Earl of Caithness

My Lords, under the terms of the 1987 Act it would be an offence to do so.

Noble Lords

Oh!

The Earl of Caithness

My Lords, noble Lords opposite may be right, but that is my advice.

Lord Hailsham of Saint Marylebone

My Lords, is it not manifest that my noble friend replies on behalf of the Government and is only entitled to disclose matters which are within the Government's responsibility? Is that not plainly the constitutional position?

The Earl of Caithness

My Lords, I am grateful to my noble and learned friend for explaining the position more clearly than I did.

Lord Taylor of Gryfe

My Lords, is not the Minister aware that the Bank of England has on a number of occasions recently threatened to withdraw the banking licence from certain reputable banks operating in this country? Does he not consider that there is a case for looking seriously at taking similar action in connection with this bank?

The Earl of Caithness

My Lords, what the noble Lord says may or may not be true, but that is a matter for the Bank of England. I know that noble Lords opposite would be the first to complain if they felt the Government were interfering.

Lord Brougham and Vaux

My Lords, do the Government feel that the Bank of England fulfils its supervisory duties properly?

The Earl of Caithness

My Lords, in the light of what has been said, I think that my noble friend's question is very pertinent. We have absolute confidence in the Bank of England.

Lord Harris of Greenwich

My Lords, is not the noble Earl aware that the Bank of England was sharply criticised by the Home Affairs Committee of the House of Commons for being rather complacent in relation to money laundering? In the context of that situation, I hope I may remind the noble Earl that the Banking Act, to which he has drawn our attention, requires banks operating in this country to conduct their business in a prudent manner and with integrity. In the light of that situation, have no Treasury Ministers found it necessary to discuss this matter with the Governor of the Bank of England, who is of course accountable to Ministers for his behaviour?

The Earl of Caithness

My Lords, the Banking Act also requires the Bank of England to satisfy itself that owners and controllers are what it terms fit and proper persons. I am sure that that is what the Bank will do.

Lord Mishcon

My Lords, whatever the constitutional position, as so correctly given to us by the noble and learned Lord, Lord Hailsham, may be, is there anything to stop a Treasury Minister from having a discussion with the Bank of England?

The Earl of Caithness

My Lords, Treasury Ministers have discussions with the Bank of England on a number of issues.

Lord Harris of Greenwich

My Lords, have Ministers had any discussion with the Governor of the Bank of England on this matter?

The Earl of Caithness

My Lords, I am not aware of anything particular regarding this issue.

Lord Mishcon

My Lords, will the Minister now have such a discussion?

The Earl of Caithness

My Lords, I shall pass those comments on to my right honourable friend the Chancellor of the Exchequer.