» Friday, January 22, 2010


Asked for the Prime Minister’s reaction to President Obama’s plans for US banking, the Prime Minister’s Spokesman (PMS) told the assembled press that we would have to look at it in detail. What the President was doing was very much in accordance with the direction that we had been taking. One of the issues in the banking world was that there were different circumstances in different countries.

In the UK we had a banking crisis that was not just part of the global economic crisis but had very particular UK features. That was why we had supported our banking system in the way that we had. The Government had already passed the Financial Services Bill and given more power to the FSA.

The Prime Minister’s view was that one of the central issues here was risk management and anything that could be done to ensure that the kind of risks that were being taken and contributing to the banking crisis were mitigated, had to be the right thing.

Asked about President Obama’s idea of limiting market trading to 10% and the fact that there was a clear difference between the way the UK was doing things and how the US were, the PMS said that each country would have a particular set of circumstances. The American banking system had banks that had both investment and commercial banking arms.

We had taken action including the living wills action in the Financial Services Bill that foreshadowed the separation of different parts of a bank. So it was premature to make any detailed comments about the report, but we would be studying the details.

Asked whether the Prime Minister had spoken to President Obama about these new plans, the PMS replied that they last spoke earlier this week. They spoke about the economic and financial situation. The Prime Minister and the Chancellor had been very consistent in emphasising that we needed to have a healthy banking sector but also a responsible one.

Put that the Government was not ruling out limiting what commercial banks could do, the PMS replied that we would study the proposals; each country had its own particular set of circumstances around their banking sector. The PMS added that Lord Myners had already spoken on the subject and spoke about the particular circumstances in the US and the sheer scale of their largest banks, compared with the rest of the banking industry.

Asked if the package we currently had was enough or would the Government be talking to the bigger UK banks and telling them that we would be doing more, the PMS said there would be a range of measures going through the Financial Services Bill but we were in a very different position when it came to RBS and Lloyds; we were shareholders in both of them and had significant stakes in those banks.

The PMS said that there was a global aspect to this and that was why the discussions in Pittsburgh were so important. That was why Lord Myners was bringing together some of the international bodies involved in his meeting on Monday, such as the IMF and the Financial Stability Board.

Put that every time the Prime Minister had been asked about separating out retail and investment banking he had rejected the idea, the PMS said he would not put it as directly as that as that was what a living will effectively was.

Asked if the banking industry would be better served with these new initiatives coming through the G20 for instance rather than being done unilaterally, the PMS replied that the G20 had talked about this in September. A number of initiatives came through that process including the UK bonus tax, which started as an idea in Pittsburgh.

Asked if there were specific conditions attached to the money given by the Government to RBS and Lloyds, the PMS said that there had been; these were set out in the asset protection scheme that Lloyds and RBS had signed up to, although Lloyds had now bought themselves out of it. The Government had also protected its investment by taking stakes in the banks, so at some stage the taxpayer would get a return.

Put that it looked like there would be one set of rules in the US and another set of rules in the UK, the PMS said that he wouldn’t characterise it like that. There were a number of international elements to this such as G20 and Basel, within which banks had to operate and many of the frameworks overarched national boundaries.

Asked if the Prime Minister welcomed the proposals from President Obama, the PMS said that what President Obama was suggesting was very much in accordance with the direction we had been setting. Asked if the Prime Minister was worried that only the US and the UK seemed to be taking any of these steps, the PMS replied that banking was a global business and that was why there needed to be an overarching approach to some of the bigger issues.

original source.

Briefing took place at 10:00 | Search for related news

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