Deposit and Lending Rates

HC Deb 25 July 1969 vol 787 cc604-5W

Mr. Sheldon

asked the Chancellor of the Exchequer what is the outcome of his review of the clearing banks cartel of deposit and lending rates.

Mr. Roy Jenkins

The Government have reviewed the arrangements under which the London clearing banks and the Scottish banks respectively agree among themselves as to the rates which they pay upon deposits and charge upon certain types of lending, in the light of the views expressed by the National Board for Prices and Incomes in its Report on Bank Charges (Cmnd. 3292) and by the Monopolies Commission in its Report on the proposals for a merger between Barclays, Lloyds and Martins Banks (H.C. No. 319 of 1968).

It can be argued that the abolition of these arrangements would in the long run be in the public interest, as conducive to greater competitiveness in the banking system. So long, however, as the banks are being asked to operate under a system of tight credit control which narrowly restricts their ability to compete in their lending, they would not in practice be able to make any significant use of the opportunities for greater competition that abolition of the cartel would in theory provide.

The Government have therefore concluded that the public interest would not be served, at any rate at the present time, by urging the banks to abandon their agreement upon deposit and lending rates. The representatives of the banks concerned have been informed of this conclusion.