Q 4375 The Archbishop of Canterbury: One bit of evidence that came out most memorably from the former head of the Union Bank of Switzerland, but confirmed by numerous others, is that you can have big simple banks or small complex ones, and you can usually manage them if you are competent. Big complex banks are not only too big to fail, but they are too big to manage, yet this afternoon we have heard you continue to defend the idea of a small group of absolutely colossal banks, including RBS, which even in its reduced size is still enormous and highly complex. Is that lack of will to break them up and reduce them to a size that eliminated risk to the economy not simply a recipe for a repetition of the disasters we have seen in the past few years?
Q 4376 The Archbishop of Canterbury: The evidence Andy Haldane showed us is that there ere are no economies of scale at this size — in fact, quite the reverse. Foreign banks are not our problem; they are the problem of the regulator where they are located. What about the British banks? The evidence was not that they are difficult to manage when they are big and complex, but that they are impossible to manage when they are big and complex.
Next, some questions by Nigel Lawson (the UK’s former finance minister) on the subject of the 3% leverage ratio being contemplated by Osborne.
Q 4327 Lord Lawson of Blaby: May I just continue a little bit on this leverage ratio? It is all very well to look at Europe, but there are only two world - class banking centres: this country and the United States, particularly New York. You are aware, aren’t you, that the Americans are moving towards a 5% leverage ratio? Do you think that that is going to be very damaging to them?
Mr Osborne: I do not have in front of me the evidence of the impact on their industry.
Q 4328 Lord Lawson of Blaby: But don’t you think that they have thought hard about it? Have you had discussions with your American opposite number on this point? They are not thinking of going to 4%, they are planning to go to 5%.
Mr Osborne: No, I have not had this specific discussion with either my new opposite number or my previous opposite number on that point. Often our discussion with the United States is around making sure that the Basel III agreement is properly implemented.
Q 4329 Lord Lawson of Blaby: May I suggest that it might be sensible to reflect further on this in the light of what the Americans are doing and of the reasons that led them to reach this conclusion? On another aspect, you absolutely correctly pointed out right at the beginning, in your initial answer to the Chairman’s first question.
Mr Osborne: We discussed this when I was last before the Commission. I feel that we have come up with a solution that reflects the structure of our industry — with the ring - fencing proposals.
Q 4330 Lord Lawson of Blaby: With respect, that is not answering the question….