Northern Rock and Banking Reform

I could devise a great headline for that intervention along the lines of, ““State Support Essential for Organisations that Made £40 Billion in Last Fiscal Year””. The hon. Gentleman should get real and understand that banks have to operate in the market like everyone else. The depositors, however, need to be protected because they can do due diligence with regard to the Royal Bank of Scotland, Barclays, Lloyds or whatever. We all recognise that. That point leads me on neatly to the depositor protection fund, which is a key way in which small depositors can be assured in times of crisis that their funds are there and can be made available quickly. The Treasury Committee recommended a pre-funded system for that process. The benefits we identified were that it would reassure depositors that their money is there and that they can have it, and prevent banks from being called upon in times of crisis to bail out their insolvent competitors' depositors. On the pre-funded aspect, funds should be allowed to build up in good times so that they are available when things take a turn for the worse. Why did we recommend pre-funding for banks? It is obviously the case that banks have a responsibility to provide funds that assist in the maintenance of consumer confidence in the industry. We acknowledge that the Government might have to provide funding for the depositor protection scheme in case of a systemic difficulty, but a single bank—this is a lesson for the future—should not require Government support. We must put in place a mechanism to ensure that. It could be said that this is not the time for banks to pay into such a fund. The hon. Member for Sevenoaks (Mr. Fallon) and myself went to the United States in December—[Interruption.] We did so with the approval of the entire Committee, to talk to the Federal Reserve, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation and others, and we took the opportunity to meet the American Bankers Association. I felt that the ABA would disagree fundamentally with us about a pre-funded scheme, but it encouraged us with respect to such a scheme, saying that it was important for consumer confidence. The support of such an organisation, which represents American banks, is a big plus in terms of having a pre-funded scheme.