§ Mr. Leeasked the Chancellor of the Exchequer what is the total financial assistance provided to date from the beginning of June 1973 under the direction of the Bank of England to secondary banks; what steps are now being taken to prevent any recurrence of this secondary bank phenomenon in the light of the current reduction of interest rates and the current relaxation of the credit restrictions; and if he will make a statement.
§ Mr. Denzil DaviesDeposits recycled by the bank of England and the London and Scottish clearing banks under the "lifeboat" scheme at one time reached an outstanding total of almost £1,300 million. Many of these deposits have since been repaid and the present outstanding total is about half that sum. The Governor of the Bank of England has given a full explanation of the financial sector support operations to Sub-Committee C of the Select Committee on Nationalised Industries on 18th and 25th January.
As the Governor explained, since the events of 1973–74 the Bank has much intensified its prudential supervision of banks and has extended it to institutions outside the banking sector; and international responsibilities for banks operating outside their country of origin have been much more clearly defined.
For the future, the Government have announced that they will introduce legislation to set up a prior authorisation system for banks and other institutions which take deposits from the public as 230W soon as parliamentary time permits. This legislation will provide a statutory framework for the Bank of England's prudential supervision. As I told the house on 16th December, it is hoped to publish draft clauses of this legislation later in the Session.