Asked by: Lord Myners (Crossbench - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what steps (1) they, or (2) any regulators, have taken to check whether the insurance security offered to investors by Greensill Capital was reflected in the policies secured from insurers; and whether any such policies were written by related parties.
Answered by Lord Agnew of Oulton
Greensill is an international group of firms, including an Australian holding company and a German bank. There are two UK entities – Greensill Capital UK and Greensill Capital Securities Limited.
Greensill Capital UK is not authorised by the UK financial authorities. It is registered under Anti-Money Laundering regulations, which means that the Financial Conduct Authority (FCA) supervises it for compliance with anti-money laundering rules, but not for wider conduct issues.
Greensill Capital Securities Limited is not authorised or supervised by the FCA but was an Appointed Representative of a regulated firm (Mirabella Advisers). An Appointed Representative is a firm or person who carries out regulated activities under the supervision of a firm directly authorised by the FCA (known as a principal firm). A principal firm is responsible for ensuring that its Appointed Representative complies with the requirements, rules and regulations of the FCA.
HM Treasury has been working closely with the FCA and PRA to monitor developments and assess the implications for the financial sector, and with other government departments to understand any impacts that these developments may have on linked UK-based companies and the services they provide.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government which financial regulator has primary responsibility for supervising Greensill Capital and its affiliates.
Answered by Lord Agnew of Oulton
Greensill is an international group of firms, including an Australian holding company and a German bank. There are two UK entities – Greensill Capital UK and Greensill Capital Securities Limited.
Greensill Capital UK is not authorised by the UK financial authorities. It is registered under Anti-Money Laundering regulations, which means that the Financial Conduct Authority (FCA) supervises it for compliance with anti-money laundering rules, but not for wider conduct issues.
Greensill Capital Securities Limited is not authorised or supervised by the FCA but was an Appointed Representative of a regulated firm (Mirabella Advisers). An Appointed Representative is a firm or person who carries out regulated activities under the supervision of a firm directly authorised by the FCA (known as a principal firm). A principal firm is responsible for ensuring that its Appointed Representative complies with the requirements, rules and regulations of the FCA.
HM Treasury has been working closely with the FCA and PRA to monitor developments and assess the implications for the financial sector, and with other government departments to understand any impacts that these developments may have on linked UK-based companies and the services they provide.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government whether (1) they, (2) the Financial Conduct Authority, or (3) the Prudential Regulation Authority, have taken any action in respect of the decision by Credit Suisse Asset Management to suspend dealing in supply chain finance funds managed by Greensill Capital because of uncertainties with respect to accurate valuation.
Answered by Lord Agnew of Oulton
Greensill is an international group of firms, including an Australian holding company and a German bank. There are two UK entities – Greensill Capital UK and Greensill Capital Securities Limited.
Greensill Capital UK is not authorised by the UK financial authorities. It is registered under Anti-Money Laundering regulations, which means that the Financial Conduct Authority (FCA) supervises it for compliance with anti-money laundering rules, but not for wider conduct issues.
Greensill Capital Securities Limited is not authorised or supervised by the FCA but was an Appointed Representative of a regulated firm (Mirabella Advisers). An Appointed Representative is a firm or person who carries out regulated activities under the supervision of a firm directly authorised by the FCA (known as a principal firm). A principal firm is responsible for ensuring that its Appointed Representative complies with the requirements, rules and regulations of the FCA.
HM Treasury has been working closely with the FCA and PRA to monitor developments and assess the implications for the financial sector, and with other government departments to understand any impacts that these developments may have on linked UK-based companies and the services they provide.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of the impact of quantitative easing on the (1) value weighted maturity of government funding, and (2) sensitivity of government finance to interest rate changes.
Answered by Lord Agnew of Oulton
The Office of Budget Responsibility set out in its March 2021 Economic and Fiscal Outlook the impact of quantitative easing on the average maturity of UK government bonds and debt interest sensitivity of government finances.
Quantitative easing has reduced the mean maturity of UK government debt from 15 years to 11 years. After accounting for the impact of quantitative easing, the effective average maturity of the UK’s gilt portfolio remains much higher than G7 peers.
Once quantitative easing reaches its current target size, it will increase central government debt interest sensitivity to a 1 percent rise in short term rates by £9bn. The OBR’s report noted that quantitative easing is expected to provide a net interest saving for the public sector of £17.8bn in 2021-22.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what steps they are taking to ensure that the valuations of investment funds investing in supply chain finance are true and fair; and that such funds are suitable to enable a daily dealing facility for investors.
Answered by Lord Agnew of Oulton
This is a matter for the Financial Conduct Authority (FCA), which is operationally independent from Government. The question has been passed on to the FCA. The FCA will reply directly to the noble Lord by letter. A copy of the letter will be placed in the Library of the House.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what, if any, plans they have to give the Monetary Policy Committee greater freedom in the interpretation of that Committee’s inflation target following the lifting of the restrictions in place to address the COVID-19 pandemic.
Answered by Lord Agnew of Oulton
The remit of the MPC is set by the Chancellor and is reaffirmed yearly through a letter to the Governor of the Bank of England. It was updated at Spring Budget 2021. The remit re-confirms the inflation target for the MPC as 2 per cent as measured by the 12-month increase in the Consumer Prices Index (CPI). This reflects the primacy of price stability and the forward-looking inflation target in the monetary policy framework. The Government’s commitment to price stability remains absolute.
The MPC’s remit already provides flexibility around the inflation target, allowing inflation to deviate temporarily in circumstances where attempts to hit the target may cause undesirable volatility in output or exacerbate financial stability risks.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of the impact of 10 years' of reduction in the corporation tax rate on (1) economic growth, (2) productivity, (3) innovation, and (4) employment.
Answered by Lord Agnew of Oulton
The economic impacts of reductions in the rate of Corporation Tax since 2010 have been reflected in the OBR’s forecasts, and detailed in the OBR’s published Economic and Fiscal Outlooks as the rate had been reduced.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government whether they, or any regulators, have reviewed the adequacy of the capitalisation of securities and derivative clearing houses since the introduction of restrictions on dealings in GameStop and AMC Entertainment; and what assessment they have made of the robustness of resolution plans for clearing houses
Answered by Lord Agnew of Oulton
GameStop and AMC Entertainment are companies that are listed in the US and therefore fall within the remit of the relevant US regulators.
More broadly, however, the UK has a robust oversight and resolution regime in place for UK clearing houses (“CCPs”). The Government is committed to ensuring the highest regulatory standards for CCP oversight and resolution and keeps the regulatory framework under regular review.
Any restriction in the trading of specific UK shares would not itself have a detrimental effect on a UK CCP’s resources, as it would only mean less transactions cleared through the CCP.
However, if a clearing firm was unable to meet existing obligations to a UK CCP, the CCPs require their members to provide pre-funded resources to mitigate against this risk. Firstly, UK CCPs require clients to post collateral to help cover their trades if they should default on their obligations. CCPs then also require their clients to contribute to a mutualised pool of resources, to be used in the event the collateral provided by a defaulter is insufficient. This pool should, at a minimum, cover the default of the CCP’s two largest clients simultaneously.
In the unlikely circumstances where these pre-funded resources provided by its clients are insufficient, UK CCPs are also required to maintain a recovery plan to ensure the continuity of its services.
The Bank of England, as the regulator responsible for supervising CCPs in the UK, has close oversight of the requirements on firms set out above and is responsible for making sure that CCPs’ recovery plans are robust and up to date.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of the impact of (1) quantitative easing, and (2) monetary policy in general, on reaching their inflation target.
Answered by Lord Agnew of Oulton
The Bank of England has statutory responsibilities for monetary policy, including quantitative easing, and financial stability, and operational independence from the Government to carry out those responsibilities.
The separation of fiscal and monetary policy is a key feature of the UK’s economic framework, and essential for the effective delivery of monetary policy, so the Government does not comment on the conduct or effectiveness of monetary policy.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of the impact on the sensitivity of public sector borrowing costs to interest rate changes as a result of quantitative easing affecting the maturity of public sector funding; and what plans they have to publish comparative sensitivity data from the time since quantitative easing was first introduced.
Answered by Lord Agnew of Oulton
As noted in the Office for Budget Responsibility’s (OBR’s) November 2020 Economic and Fiscal Outlook (EFO), the Bank of England’s quantitative easing programme lowers government borrowing costs but shortens the average maturity of public sector debt and increases exposure to changes in short-term interest rates.
The OBR publish estimates of the sensitivity of debt interest spending to changes in interest rates in their EFO.
We have strong independent economic institutions and a well-established macroeconomic framework that ensures we are well placed to deal with risks to our public finances.