Banking: Quantitative Easing

Lord Newby Excerpts

Monday 10th October 2011 Lords Chamber

[Lord Sassoon]

My Lords, we have a portfolio of banks which the Government either wholly or partly own. The Question was about Lloyds and RBS, but we also, as the noble Lord well knows, own Northern Rock and Bradford and Bingley. It is within the mandate of UKFI, which was set down by the previous Government, of whom the noble Lord was a member, to have responsibility to seek over time to realise value from the banks. That is precisely what it is exploring in the context of Northern Rock. It is following the noble Lord’s policy.

[Lord Newby]

My Lords, given the downgrading by Moody's last week of the credit rating of a number of British banks, do the Government think that they will have to recapitalise RBS and Lloyds?

[Lord Sassoon]

My Lords, the downgrading by Moody's last week was long expected by the markets. It is largely a reflection of the fact that under the Vickers proposals—the independent commission's proposals—there will be a different relationship between the banks and the taxpayer: the taxpayer will not be on the hook for the banking system in the way that it was. As a result, as expected, Moody's changed the ratings on a number of banks. Equally, it made it clear that that was not a reflection on the well capitalised state of the UK banking system. The UK banks continue, as Moody's and others have said, to be in a more robust state to withstand shocks from the eurozone than banks on the continent of Europe.