Banking: Financial Stability

My Lords, it is not for the Government to say that people’s savings are safe in the bank; it is for the banking system, in the first instance, to prove that the British high street banks are safe and create no concern. The issue with regard to Iceland is quite straight forward: it is an exceptional circumstance where a bank fails and a Government are not able to give assurances that they can underwrite the losses of the bank. The cost of the Government taking no action at all would be the loss to all depositors, small and large, in the Icelandic bank, together with the point that was mentioned in earlier exchanges today: a significant number of local authorities in this country have also invested. That is the reason why we dealt with the Icelandic bank position. The noble Lord is asking for a complete blank cheque from the Government to banks for future action, and we are not going to do that. We are going to provide necessary support to the system, necessary increases in liquidity and a necessary strengthening of balances, but we are going to do it on negotiated terms that ensure that banks meet their responsibilities. That is the proper way for the Government to act.