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At the end of June it was revealed that LIBOR-the London Interbank Offered Rate, the benchmark used in trillions of pounds worth of financial contracts-had been subject to repeated attempts at manipulation.
Although the abuse is by no means confined to London-banks and benchmarks in a number of jurisdictions have been implicated, including Euribor and TIBOR-I am determined that we in this country should move quickly to restore credibility to this globally important benchmark and repair the damage to London's reputation caused by this behaviour and the failure of the regulatory sector to prevent it.
In July, one week after the scandal came to light, the Chancellor asked Martin Wheatley, the managing director of the Financial Services Authority and chief executive-designate of the new Financial Conduct Authority to consider immediate reforms to LIBOR and to report back by the end of September.
The Government fully endorse every one of these recommendations. All institutions involved in the process of setting LIBOR should implement them. For those recommendations that require government action, we will take it without delay.
The Government will bring forward amendments to the Financial Services Bill to implement those recommendations that require primary legislation. These amendments will enable the submission of rates to benchmarks such as LIBOR and the administration of such benchmarks to be brought within the scope of regulation. The power to regulate these activities will be vested in the new Financial Conduct Authority. Existing offences covering the making of misleading statements, under Section 397 of the Financial Services and Markets Act, will be extended to capture the making of misleading statements to manipulate benchmarks such as LIBOR. The Financial Conduct Authority will have the lead role in investigating the possible commission of such offences and bringing prosecutions.
Most people expect that the law should be respected and enforced at all levels of society. If someone breaks the law, they should be punished. Where the crime is serious, the punishment should reflect this. The Government also intend to legislate to enable the Financial Conduct Authority to make rules requiring authorised persons to contribute to the LIBOR setting process. Draft legislation and further details of these measures will be deposited in due course in the Libraries of both Houses.
But statutory regulation and criminal enforcement alone are insufficient. LIBOR is a mechanism created by the market for use by the market. That is why it is right that some of Mr Wheatley's recommendations fall to the industry to implement.
The Government agree with Mr Wheatley that, in order to restore credibility to the LIBOR setting process, the British Bankers' Association should give up its operational role with regards to the computation, administration and governance of LIBOR. Baroness Hogg has agreed to chair a panel of independent experts tasked with identifying an appropriate successor to the BBA.
Other urgent reforms will be implemented by the BBA and, in time, by the new LIBOR administrator-such as phasing out the benchmark rates for those currencies and maturities wherever they are not heavily used by the market and there is an available alternative.
The recommendation to consider the use of benchmarks in other financial and commodities markets will be taken forward through the relevant international
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The Government recognise that the LIBOR scandal cannot be seen as an isolated incident. There are wider standards of integrity and ethics in banking, which have compromised the confidence and trust between banks and the businesses, customers and general public they exist to serve.
Parliament has established the Parliamentary Commission on banking standards under the chairmanship of the honourable Member for Chichester and including similarly respected Members of both Houses. We all look forward to receiving the recommendations of the Commission by early next year.
The financial services industry is of great importance to this country. It employs, directly and indirectly, two million people, in every part of the United Kingdom. The essential condition for the functioning of the financial services industry is trust. The behaviour that has been uncovered in the LIBOR scandal corrodes that trust, and the behaviour of a few has tainted the reputation of an industry in which the vast majority of people have been proud to work, not least because it has been associated with integrity and responsibility.
We owe it to all those people as well as to the millions of people who rely on the financial services industry in their day to day lives and in running businesses to restore that reputation for probity and strength. The reforms that Martin Wheatley has recommended are a significant step towards achieving this goal.
The APS, announced in January 2009, was created to enable the UK Government to provide participating institutions with protection against future credit losses on defined portfolios of assets in exchange for a fee.
The scheme provided support to RBS during and in the immediate aftermath of the financial crisis. However, as the bank has continued to stabilise and manage down non-performing assets, the APS no longer provides material benefit in strengthening RBS's financial position.
The Government launched the Asset Protection Agency in December 2009 to manage the APS on behalf of HMT. Now that RBS has exited the APS, the agency has fulfilled its objectives and will aim to close on 31 October 2012.
It also removes a substantial contingent liability from the Government's balance sheet. At its peak, the APS pledged £400 billion of taxpayer support to the UK banking sector, and by exiting the APS, this figure is reduced from approximately £40 billion to zero. During this Parliament the taxpayer guarantee to the sector has fallen by over £450 billion, a drop of almost 95%.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley): My right honourable friend the Secretary of State for Environment, Food and Rural Affairs (Owen Paterson) has today made the following Statement.
The next Agriculture and Fisheries Council is on Monday 22 October and Tuesday 23 October in Luxembourg. I will be representing the UK, accompanied by my honourable friend the Parliamentary Under-Secretary for Natural Environment, Water and Rural Affairs (Richard Benyon). Richard Lochhead MSP and Alun Davies AM will also attend.
On agriculture there will be further discussion of the CAP reform proposals on direct payments, the single CMO regulation, and possibly the horizontal regulation. There will be a presentation by the Commission on the financing of the CAP.
On the second day the council will return to the EU Maritime and Fisheries Fund. There will also be discussions about Baltic Sea stocks, the EU/Norway 2013 catch quota and the International Commission for the Conservation of Atlantic Tunas (ICCAT) annual meeting.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi): My right honourable friend the Foreign Secretary has made the following Written Ministerial Statement.
The latest report on the implementation of the Sino-British joint declaration on Hong Kong was published today. Copies have been placed in the Library of the House. A copy of the report is also available on the Foreign and Commonwealth Office website (www.fco.gov.uk). The report covers the period from 1 January to 30 June 2012. I commend the report to the House.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi): My honourable friend the Parliamentary Under-Secretary of State Mr Mark Simmonds has made the following Written Ministerial Statement.
I would like to update the House on developments in the relationship between Sudan and South Sudan, and what action the UK took to support the negotiations between the two countries that led to the signing of nine agreements in Addis Ababa on 27 September.
The African Union has been facilitating discussion of a number of important issues that were unresolved at the date of South Sudan's secession in July 2011. A breakdown in talks at the start of this year was followed by shutdown of oil production in South Sudan and an increase in tensions and military actions by both countries across their shared border. This put a great strain on both countries' already struggling economies.
In response to the worsening situation, the Peace and Security Council of the African Union set out a road map for resumed talks towards a comprehensive agreement. This agreement was endorsed by the UN Security Council in its Resolution 2046. Five months of intensive dialogue within the framework of the road map, and UNSCR 2046, led to a four day presidential summit between the two countries in late September, the signing of an overarching presidential agreement on co-operation, and eight detailed agreements between the two countries on 27 September.
Negotiations have been facilitated throughout by the African Union High-Level Implementation Panel led by former President Thabo Mbeki. The UK has provided funding for the work of the panel and for the negotiating teams. We have seconded staff to offer expert advice on security and other issues, and deployed diplomatic support to implementation of the road map. The UK special representative for Sudan and South Sudan and other officials have been involved at key stages of the negotiations.
The agreements signed in Addis Ababa are a significant step forward. In particular, they open the way for the establishment of a safe demilitarized border zone and deployment of a joint border verification and monitoring mechanism with international involvement, as a means of avoiding military confrontation at the border and attempting to prevent cross-border assistance to rebel groups in either country. The agreements also allow significant improvements in practical co-operation,
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There are, however, still significant elements of a comprehensive agreement that are outstanding. We regret that no agreement was reached on the final status of Abyei, despite President Mbeki's presentation of a comprehensive proposal on the subject. And final demarcation of the international border remains subject to Sudan and South Sudan settling a number of disputes and claims. We have urged both countries to press on immediately with negotiation on these remaining issues, in the spirit of compromise that brought the latest round of talks to a successful conclusion.
We are deeply worried by the lack of progress in the parallel talks between the Government of Sudan and the Sudanese People's Liberation Movement-North (SPLM-N) to end the conflicts in Southern Kordofan and Blue Nile, which also form part of the African Union's road map and UN Security Council Resolution 2046. Both sides appear to be set on a military solution that is having a serious humanitarian impact on civilians in both states. The indiscriminate military tactics employed by the Sudanese armed forces are a cause of particular concern. As of the end of September, the UN Office for the Co-ordination for Humanitarian Affairs estimated that 212,000 refugees had fled to neighbouring countries as a result of the fighting and humanitarian situation.
Both parties in the conflict agreed a proposal put forward by the African Union, the United Nations and the League of Arab States for full independent humanitarian access. However, no substantive progress has been made implementing these agreements since they were signed. We continue to press the Government of Sudan in particular to allow impartial delivery of aid to areas held by the SPLM-N.
Ultimately a permanent cessation of hostilities in Southern Kordofan and Blue Nile must be agreed, and a political process established to address the causes of the conflict. Wider national reform will be necessary to address these conflicts and others in Sudan's periphery as well as the aspirations of all Sudanese people. The UK will continue to press the Government of Sudan and the SPLM-N to recognise that there is no military solution to their disputes, and that they must agree a cessation of hostilities and enter into negotiations. We will work closely with the African Union, the Arab League, President Mbeki's High-Level Implementation Panel and through the UN Security Council to this end.
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