Tyrie comments on Financial Policy Committee evidence session

The Chairman Andrew Tyrie MP, said:

On ‘Project Verde’

“The Chairman of Lloyds, Sir Win Bischoff, told the Treasury Committee that Lloyds became aware of a potential capital shortfall at the Co-operative Group in December 2012.

“Andrew Bailey today said that he told the Co-operative Bank’s Board that it should inform Lloyds of the regulator’s concerns, including over its capital levels, more than a year beforehand.

“Mr Bailey also told us he has evidence to suggest his requests were complied with.

“The Treasury Committee will want to look at whether the regulator’s message got through, how it was conveyed and what, if any, action was taken as a result.”

On the leverage ratio:

“FPC members today made clear that they feel a 3% leverage ratio is an appropriate minimum backstop and that the FPC can make recommendations in this area, even without an explicit power of direction.

“This is a step in the right direction. Any further announcements should be communicated clearly and in good time.

“Bank lobbying of Government only serves to reinforce the need for the power to set the leverage ratio to lie with the independent FPC, not the Treasury.

“The Banking Commission recommended that the FPC immediately be given the power to set the leverage ratio. If the Government continues to resist handing the FPC this power, the Commission also recommended that the FPC should publish its own assessment of the appropriate leverage ratio.

“They should now do so.”