Rt Hon Lord Lilley

    Statement
    Date of Proceeding: 06.10.2008
    Reference: 480 c36
    Member: Lilley, Peter
    Title: Financial Markets
    Description: Does the Chancellor agree that guaranteeing all deposits, although it may well prove necessary, is at best a sticking plaster, not a cure for the underlying disease, which is that the value of loans made by banks, and even more of the collateral that they have accepted, has fallen below their obligations and their ability to meet them from reserves? If he is not to have to make that good himself, he must provide incentives for those banks to raise new reserves. Will he consider guaranteeing the proportion of reserves newly raised from this date in the event of any subsequent reconstruction in which the state is involved? Does the Chancellor agree that guaranteeing all deposits, although it may well prove necessary, is at best a sticking plaster, not a cure for the underlying disease, which is that the value of loans made by banks, and even more of the collateral that they have accepted, has fallen below their obligations and their ability to meet them from reserves? If he is not to have to make that good himself, he must provide incentives for those banks to raise new reserves. Will he consider guaranteeing the proportion of reserves newly raised from this date in the event of any subsequent reconstruction in which the state is involved?
    Proceeding: 72759
    Legislature: House of Commons (HoC)
    Place: Commons Chamber
    Session: 07-08

     

    Mr. Darling:
    The right hon. Gentleman is right. If we look at the fundamental causes of the problem, we see that banks took on risks that either they did not evaluate or, if they did, they did not take enough steps to ensure that they could withstand any fall in assets. That is something that we need to look at, and it is something that the regulators need to look at.

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