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Cablegate: Parliament's Treasury Committee Clears Calendar for Banking Inquiry

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DE RUEHLO #2629 2911636
ZNR UUUUU ZZH
R 171636Z OCT 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC 0113
INFO RUEHED/AMCONSUL EDINBURGH 1002
RUEHBL/AMCONSUL BELFAST 1145
RUEATRS/DEPT OF TREASURY WASHDC
RUENMEM/EU MEMBER STATES

UNCLAS LONDON 002629

SENSITIVE SIPDIS

E.O. 12958: N/A

TAGS: ECON EFIN UK

SUBJECT: PARLIAMENT'S TREASURY COMMITTEE CLEARS CALENDAR FOR BANKING INQUIRY

1.(SBU) On October 14, the Treasury Committee of the Parliament announced an urgent inquiry into the banking crisis. "The inquiry will take a fundamental look at the causes of the present banking crisis, the current responsibilities of the banks, and the Government to the taxpayer, and the future shape of the financial and regulatory landscape,", said John McFall, Chairman of the Treasury Committee. In an unprecedented move, the Committee is asking members of the public to send in questions they would like to see put to the heads of the Tripartite Committee, Chancellor Darling, Bank of England Governor King, and Financial Services Authority Chairman Turner whom the Committee has invited to appear. Questions can be submitted to bankingcrisis@parliament.uk up to 48 hours before the hearing date. In the first three days, over 300 questions have been submitted. No date has been set for the first evidence session that will involve the heads of the Tripartite Committee, but a Treasury Committee source told Econoff that the Committee is targeting November 3, subject to clearing the calendars of the key presenters.

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2. (SBU) The Treasury Committee has "cleared its fall calendar" for the banking inquiry, according to XXXXXXXXXXXX at the Treasury Committee in a meeting with Econoffs October 17. XXXXXXXXXXXX said the objective is to complete the inquiry before Christmas, but that this will probably not be possible, given the amount of work involved. XXXXXXXXXXXX envisages the inquiry will follow several tracks. The first will examine the specific circumstances surrounding the nationalization of Northern Rock, Bradford and Bingley, and possibly the takeover of HBOS by Lloyds TSB. The Lloyds/HBOS transaction may be excluded if it is not yet finalized. The second will likely examine the remuneration of senior executives, including bonuses. A third will consider the role of accounting standards and the valuation of certain financial products in precipitating or exacerbating the crisis. A fourth will consider the sustainability of all existing and proposed government programs in light of the current economic slowdown and the financial commitments undertaken by the government's financial sector rescue plans. Regarding the last element, the government will issue its pre-budget report (PBR) before the end of the inquiry. XXXXXXXXXXXX said he expects that before the PBR is finalized, the government will need to "tear up" the fiscal rules that restrict its deficit spending.

3.(SBU) The inquiry will mean that no work will be done in any other area until after the New Year, according to XXXXXXXXXXXX. Specifically, this means that there will be no further work in reviewing extraordinary movements in the price of oil, including any possible role of hedge funds and commodity speculators. Recent declines in the price of oil to below $70 per barrel have blunted the political urgency to address this issue. The matter is not off the committee agenda, but is decidedly on the back burner, stated XXXXXXXXXXXX. TUTTLE

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